Independent Fiscal Institutions as a Tool of Fiscal Governance

Ryta Dziemianowicz

doi:10.12775/equil.2014.004

Abstract

The recent economic crisis, one of the symptoms of which is a sudden increase of public debt in the majority of OECD countries, again made the government and the society aware of the necessity for conducting transparent, but also responsible fiscal policy. Creating a framework of the fiscal discipline responsible fiscal policy started to be perceived as an essential condition of effective governance leading to reduce budget deficit and public debt. The independent fiscal institutions may be included into regulations supporting public finance management. Their fundamental aim is to reduce the related risk of conducting the irresponsible fiscal policy, monitoring it, controlling deficit and assessing long-term effects of government action in this area. The purpose of this article is to present independent fiscal institutions and evaluate their usefulness in enhancing the effectiveness of the fiscal policy and stabilizing public finance. Experiences of the EU and OECD countries were used in the analysis.

Highlights

The last economic crisis, one of the symptoms of which is a sudden increase of budget deficit, and public debt in most EU countries, again reminded both those in power and the public about the need for a transparent, and a responsible fiscal policy
One of the tools supporting fiscal governance are independent fiscal institutions, the main objective of which is limiting the risk associated with irresponsible fiscal policy, especially its monitoring, control of deficit and evaluation of the long-term results of the actions taken by the government in this regard
One of the tools of the responsible fiscal policy are independent fiscal agencies modeled on the boards of monetary policy, giving opinion on and supporting the fiscal policy implemented by the government

Summary

Introduction

The last economic crisis, one of the symptoms of which is a sudden increase of budget deficit, and public debt in most EU countries (and more broadly, this applies to any developed economy), again reminded both those in power and the public about the need for a transparent, and a responsible fiscal policy. Assuming that the problem of excessive public expenditures and deficits is a result of the failure in "managing" the fiscal policy (organization of the budget process), to counteract this phenomenon one should first of all implement the appropriate model of its coordination, i.e. the proper fiscal governance model. There are plenty of theoretical and empirical evidences in the reference books showing that very important in the maintenance of the fiscal discipline will be institutions managing the budget process which may determine the country fiscal actions, and those controlling the actions of the governing within this scope This is primarily about a responsible fiscal policy, budgeting, budget procedure and. The reference books more and more often indicate that the fiscal rules should be strengthened by independent fiscal agencies which will review the fiscal policy, take care of its transparency, prepare forecasts, as well as inform the public about the activities of politicians in this regard

Typology and scope of tasks of independent fiscal institutions

Providing normative assessment and recommendations

Great Britain

Conclusions