Dutch Versus Swedish Budgetary Rules: A Comparison

Abstract

Heeringa and Lindh compare the experience of the Netherlands and Sweden with fiscal rules and procedures. They note that the two countries are relatively small open economies vulnerable to negative external economic developments and have remarkably similar budgetary experience. In both countries, the introduction of budgetary rules has contributed significantly to the recent improvements of the fiscal situation. The Netherlands adopted a trend-based budgetary policy in 1994, after a period of budgetary consolidation which had started in the early 1980s. Sweden implemented new budgetary procedures in 1997, after having suffered the most severe fiscal crisis in the 20th century. In both countries, the introduction of multi-year expenditure ceilings was an important feature of the reforms; they contributed significantly to the recent favourable budgetary developments by strengthening awareness of the long-term. However, some problems of pro-cyclical behaviour have emerged.