The World's Oldest Fiscal Watchdog: CPB's Analyses Foster Consensus on Economic Policy

34 Pages Posted: 4 Apr 2012  

Frits Bos

CPB Netherlands Bureau of Economic Policy Analysis

Coen Teulings

CPB Netherlands Bureau of Economic Policy Analysis; Tinbergen Institute

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Date Written: March 2012

Abstract

The sovereign debt problems in European countries have increased the interest in fiscal watchdogs. This paper discusses the world’s oldest fiscal watchdog, CPB Netherlands Bureau for Economic Policy Analysis (CPB). CPB was founded directly after World War II. It has built a reputation of independence and quality, while it has also achieved a solid position in Dutch policy making. CPB provides (i) the macroeconomic forecast underlying the annual budget, (ii) a midterm review of the state of public finance at the start of each election cycle, (iii) cost-benefit analyses of all kind of policy proposals (from education to physical infrastructure), and (iv) an assessment of the economic impact of the platforms of political parties before the election.

Four lessons can be drawn from 65 years of Dutch experience. Firstly, a reputation of quality and independence is crucial for the success of a watchdog. Building such a reputation takes time. Secondly, the scope of activities should not be limited to fiscal policy only. The broad scope of CPB’s analyses has contributed to shared public understanding of relevant trade-offs and policy options. Thirdly, the effectiveness of CPB depends crucially on a clear demarcation of the distinctive roles of CPB and political parties. Welfare theory provides little guidance in drawing this demarcation line. Fourthly, being part of the government has the advantage of getting inside information and being effective in the daily policy making process, but the disadvantage that the actual or perceived independence is more difficult to maintain.

Keywords: CPB, Fiscal policy, History of economic policy in the Netherlands, Independent fiscal institutions, National fiscal councils, Tinbergen

JEL Classification: A11, E62, H6, N4

Suggested Citation

Bos, Frits and Teulings, Coen, The World's Oldest Fiscal Watchdog: CPB's Analyses Foster Consensus on Economic Policy (March 2012). CEPR Discussion Paper No. DP8902. Available at SSRN: https://ssrn.com/abstract=2034120

Frits Bos (Contact Author)

CPB Netherlands Bureau of Economic Policy Analysis ( email )

P.O. Box 80510
2508 GM The Hague, 2585 JR
Netherlands

C.N. Teulings

CPB Netherlands Bureau of Economic Policy Analysis ( email )

P.O. Box 80510
2508 GM The Hague, 2585 JR
Netherlands

Tinbergen Institute ( email )

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

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