Fiscal consolidation through fiscal rules?

Following the financial crisis, the budget deficits and public debt have recorded levels that no one would have considered a few years ago. Therefore, efforts are needed to achieve fiscal consolidation. Both in academic debates and policy many believe that fiscal rules should be the central element...

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Bibliographic Details
Published in:Theoretical and applied economics 2014-02, Vol.XXI (2), p.109-114
Main Authors: Alexandra ADAM, Silvia Elena IACOB
Format: Article
Language:English
Subjects:
budgetary deficit
credibility
fiscal consolidation
fiscal rules
public debt
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Summary:Following the financial crisis, the budget deficits and public debt have recorded levels that no one would have considered a few years ago. Therefore, efforts are needed to achieve fiscal consolidation. Both in academic debates and policy many believe that fiscal rules should be the central element of a successful strategy, idea argued by the fact that a rule would restrict the discretionary actions of the government, thus strengthening the fiscal consolidation. However, there are differences when it comes to precisely specifying a rule. Therefore, in this article we want to analyze how much policy makers can rely on fiscal rules, factors necessary to achieve a high degree of effectiveness of fiscal rules, if a fiscal rule should be based on the budget balance level or the debt balance level and we will analyze whether the restrictions imposed ex-ante to the fiscal policy are superior to the ex-post penalties.
ISSN:1841-8678
1844-0029