Good, Bad or Ugly? On the Effects of Fiscal Rules with Creative Accounting

26 Pages Posted: 3 Feb 2006

See all articles by Gian Maria Milesi-Ferretti

Gian Maria Milesi-Ferretti

International Monetary Fund (IMF); National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Date Written: October 2000

Abstract

Do fiscal rules likely lead to fiscal adjustment, or do they encourage the use of 'creative accounting'? This question is studied with a model in which fiscal rules are imposed on 'measured' fiscal variables, which can differ from 'true' variables because there is a margin for creative accounting. The probability of detecting creative accounting depends on its size and the transparency of the budget. The model studies the effects on fiscal policy of different rules, separating structural from cyclical effects, and examines how these effects depend on the underlying fiscal distortion and on the degree of transparency of the budget.

Keywords: Fiscal rules creative accounting budget transparency

JEL Classification: E62 H61 H62

Suggested Citation

Milesi-Ferretti, Gian Maria, Good, Bad or Ugly? On the Effects of Fiscal Rules with Creative Accounting (October 2000). IMF Working Paper, Vol. , pp. 1-26, 2000. Available at SSRN: https://ssrn.com/abstract=880217

Gian Maria Milesi-Ferretti (Contact Author)

International Monetary Fund (IMF) ( email )

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National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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