The Role of Independent Fiscal Policy Institutions

34 Pages Posted: 6 Mar 2011

See all articles by Lars Calmfors

Lars Calmfors

Research Institute of Industrial Economics; IIES

Date Written: February 28, 2011

Abstract

The paper analyses how independent fiscal watchdogs (fiscal policy councils) can strengthen the incentives for fiscal discipline. By increasing fiscal transparency they can raise the awareness of the long-run costs of current deficits and increase the reputational costs for governments of violating their fiscal rules. Councils that make also normative judgements, where fiscal policy is evaluated against the government’s own pre-set objectives, are likely to be more influential than councils that do only positive analysis. To fulfil their role adequately, fiscal watchdogs should be granted independence in much the same way as central banks.

Keywords: fiscal institutions, deficit bias, fiscal transparency

JEL Classification: H600

Suggested Citation

Calmfors, Lars, The Role of Independent Fiscal Policy Institutions (February 28, 2011). CESifo Working Paper Series No. 3367. Available at SSRN: https://ssrn.com/abstract=1775797

Lars Calmfors (Contact Author)

Research Institute of Industrial Economics ( email )

Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden
+46761355814 (Phone)

IIES ( email )

Stockholm, SE-10691
Sweden
+468163076 (Phone)

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