Comparing the Delegation of Monetary and Fiscal Policy

36 Pages Posted: 18 May 2011

See all articles by Simon Wren-Lewis

Simon Wren-Lewis

University of Oxford - Economics Department

Date Written: March 1, 2011


The apparent success of independent central banks in conducting monetary policy has led many to argue that some form of policy delegation should also be applied to the macroeconomic aspects of fiscal policy. A number of countries have recently established Fiscal Councils, although their role is typically to give advice on paths for government debt and deficits rather than decide upon and implement policy. This paper examines how useful a comparison between monetary and fiscal policy can be in motivating and guiding Fiscal Councils. Simple analogies between inflation bias and deficit bias can be misleading, and the motives for delegating aspects of fiscal policy may be rather different from those generally associated with monetary policy. In addition, lack of knowledge about the desirable goals of long run debt policy, compared to a greater understanding of the objectives of monetary policy, may help explain key differences in the nature of delegation between the two. The paper ends by making some comparisons between the delegation of monetary and fiscal policy in the United Kingdom.

Keywords: Delegation, fiscal councils, deficit bias, government debt

JEL Classification: E02, E62, E65

Suggested Citation

Wren-Lewis, Simon J.Q., Comparing the Delegation of Monetary and Fiscal Policy (March 1, 2011). Available at SSRN: or

Simon J.Q. Wren-Lewis (Contact Author)

University of Oxford - Economics Department ( email )

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