How Do Expenditure Rules Affect Fiscal Behaviour?

18 Pages Posted: 14 Feb 2012

See all articles by Peter Wierts

Peter Wierts

De Nederlandsche Bank; VU University Amsterdam

Date Written: February 13, 2012

Abstract

This paper investigates the effects of self-enforced expenditure rules on fiscal behaviour. According to theory, such rules can restrain spending biases if the political and institutional costs of non-compliance are sufficiently large. The empirical analysis indicates that the institutional design of the rules reflects political willingness to address high expenditure to GDP ratios. Through this effect, well-designed expenditure rules have a restraining impact on expenditure outcomes, and also mitigate the effect of shocks on expenditure developments.

Suggested Citation

Wierts, Peter, How Do Expenditure Rules Affect Fiscal Behaviour? (February 13, 2012). Available at SSRN: https://ssrn.com/abstract=2004456 or http://dx.doi.org/10.2139/ssrn.2004456

Peter Wierts (Contact Author)

De Nederlandsche Bank ( email )

P.O. Box 98
1000 AB Amsterdam
Netherlands

VU University Amsterdam ( email )

De Boelelaan 1105
Amsterdam, 1081HV
Netherlands

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