Independent Fiscal Agencies

Abstract

There has been a considerable literature regarding the incentives of policymakers as a prime reason for persistent fiscal deficits and a variety of fiscal rules have been proposed as a remedy. However, the often inadequate flexibility of rules and the success of policy delegation in the monetary realm have motivated a small but growing number of studies that suggest delegating some aspects of fiscal policy to what will here be called independent fiscal agencies. This paper surveys the related literature with a focus on three aspects: the motivation for the establishment of such agencies; their potential design; and the experience with these types of institutions.