Abstract
Fiscal councils are independent institutions that play an important role in execution of fiscal rules and budgetary discipline through their realistic and unbiased macroeconomic and budgetary analysis and projections. It is important that the fiscal councils have easy access to the media to ensure that their analyses reach the wider public, and influence creators of fiscal policy. This paper analyzes the influence of fiscal councils on budget balance and public debt in period before and after financial crisis. The member states that had functioning fiscal councils before the financial crisis, on average, manage their public finances better than those who founded them after the beginning of crisis. Additionally, supervision of the enforcements of fiscal rules from fiscal boards is already showing positive results in this short time period. Fiscal councils are extremely important to ensure a healthy basis for conducting fiscal policy and to decrease the influence of politics on public finance management.
Highlights
Literature overviewThere are number of papers on fiscal councils and some of them are dealing with effectiveness of independent fiscal institutions
The sovereign debt crisis raised the issue of the weaknesses of the economic framework for the management of public finance in the world, and the EU has given special attention to it, especially within the European Monetary Union, wherever complex and demanding rules of public finance management are introduced
An analysis of the selected twelve Member States of the European Union showed following results. Budget balance in these countries moved in line with expectations due to the financial crisis of 2008, with respect that certain European countries (Portugal, Ireland, Greece and Spain) were affected by the debt crisis of 2010, which had as a consequence the introduction of stricter supranational fiscal rules
Summary
There are number of papers on fiscal councils and some of them are dealing with effectiveness of independent fiscal institutions. There is a paper from authors Beetsma and Debrun, which is dealing with effectiveness of fiscal councils. Discusses effectiveness and rationale of independent fiscal institutions, which is another name of fiscal councils They defined fiscal councils as independent institutions from creators of fiscal policy. Another paper by Debrun, Kinda, Curristine, Eyraud, Harris and Seiwald extensively explain the functions and impact of fiscal councils. They define fiscal councils as independent public institutions with various functions. There are following functions they single out: assessments of fiscal plans, evaluation of macroeconomic and budgetary forecasts They conclude that fiscal councils are promoting fiscal discipline if fiscal councils are well designed (Debrun et al, 2013). Fiscal councils can only use public space and convincing to steer in the right direction (Beetsma and Debrun, 2016b)
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