Fiscal Policy: Institutions Versus Rules
40 Pages Posted: 28 Mar 2002
Date Written: February 2002
The Paper explores how fiscal policy can be made both more disciplined and more counter-cyclical. It first examines whether the decline of public debts observed in the OECD area during the 1990s can be explained either by less activism or by a priority towards consolidation. It then argues that rules, for example the Stability and Growth Pact, are less likely to deliver the desired outcome than institutions. Drawing a parallel with monetary policy, it examines how a Fiscal Policy Committee could reproduce what Monetary Policy Committees have achieved in central banking.
Keywords: Fiscal policy, discipline, cyclicality, rules and discretion, institutions
JEL Classification: D78, E32, E63, H60
Suggested Citation: Suggested Citation