Fiscal Councils Research Articles

Srbija i ekonomske implikacije vladavine prava

The rule of law is a concept of par excellence political and legal nature. However, in view of considerable economic implications of the rule of law, it is justifiable to single out the economic concept of the rule of law. The rule of law is subject matter of economic analysis of law and institutional economics which apply different methodological paradigms in analyzing its complex and multidimensional nature. The paper presents a survey of the issues and problems pertinent to the theoretical framework that correlates the rule of law and economic growth. The paper discusses how different economic paradigms understand rule of law, how it is developed, and the possible implications on economic efficiency, transaction costs, entrepreneurship, specialization, investments and economic growth. The paper points out to economic consequences of the weak rule of law in Serbia and deals with correlations between the rule of law and indicators of economic performance in Serbia. The findings of local and international reports continuously emphasize the problem of the weak rule of law in Serbia. Although the European Commission Progress Report on Serbia 2019 commanded Serbia's progress in some areas, it has underlined again the weak rule of law. This statement refers to Chapters 23 and 24 of the Accession Negations, as well as to the problem of establishing the functional market economy, business environment and structural reforms. Economic implications of the weak rule of law are reflected in insufficient investment which cannot cover the underinvestment trend observable for years. The Fiscal Council of the Republic of Serbia points out to the weak rule of law as a fundamental factor for insufficient economic growth rate.

Anchor Me: The Benefits and Challenges of Fiscal Responsibility

This paper discusses the benefits and challenges of implementing a rule-based fiscal responsibility framework, using the Philippines as a case study. It estimates structural measures of the fiscal stance over the period 1980–2016 and applies a stochastic simulation model to determine the optimal set of fiscal rules. The empirical analysis indicates that discretionary fiscal policy has been procyclical, and the degree of procyclicality has increased in recent years. While the national government’s non-binding ceiling on the overall budget deficit is helpful, it does not constitute an appropriate operational target to guide fiscal policy over the economic cycle and necessarily ensure that the fiscal stance meets the government’s intertemporal budget constraint. To this end, using stochastic simulations, this paper makes the case for a well-designed fiscal responsibility law that enshrines explicit fiscal rules designed for countercyclical policy and long-term debt sustainability, and an independent fiscal council to improve accountability and transparency.

A feasibility study of establishing fiscal council in Indonesia

In this paper we address the quantitative measurement of credibility in fiscal policy in the case of Indonesia over the period 2001-201 6. This preliminary paper focuses on the deviations of the actual budget balances from the projections about these balances in the preceding years. The objective is to extract from these data insights into the credibility of the government fiscal policies. We found that fiscal policy as conducted by government is not perceived as credible. The targets set forward by government are often not met and usually the divergence is on the negative side. Revenue and spending are overestimated, leading to a deficit bias and growing indebtedness of government. Those results suggest feasibility to establish the fiscal council with independent powers to conduct the credible fiscal policy in order to maintain fiscal sustainability in the long-term.

Under threat: Rules-based fiscal policy and how to preserve it

Rules-based fiscal policy is under threat. Over the last two decades, it proved frustratingly complicated to strike the right balance between three essential properties of sound fiscal policy rules: simplicity, flexibility, and enforceability. Simplicity has been sacrificed to ensure that more contingent (i.e. flexible) rules remained enforceable. The resulting arrangements have failed to adequately guide fiscal policy, undermining formal compliance, and ultimately, popular and political support for rules. To mitigate the risk that countries abandon rules-based policymaking, we suggest downplaying enforceability—i.e. the role of formal sanctions through enforcement—and enhancing the reputational costs of breaching rules. At the limit, the rule could consist of a simple quantitative benchmark for a key fiscal indicator. To boost reputational effects, independent fiscal councils should focus on debunking the “fiscal alchemy,” clearing the public debate from partisan smokescreens, and fostering popular support for sound fiscal policies.

Independent fiscal councils: Recent trends and performance

Countries increasingly rely on independent fiscal councils to constrain policymakers’ discretion and curb the bias towards excessive deficits and pro-cyclical policies. Since fiscal councils are often recent and heterogeneous across countries, assessing their impact is challenging. Using the latest (2016) vintage of the IMF Fiscal Council Dataset, we focus on two tasks expected to strengthen fiscal performance: the preparation or assessment of forecasts, and the monitoring of compliance with fiscal rules. Tentative econometric evidence suggests that the presence of a fiscal council is associated with more accurate and possibly less optimistic fiscal forecasts, as well as greater compliance with fiscal rules.

The Troika Is Dead, Long Live the Domestic Troikas??: Varieties of Technocracy and the Diffusion of National Fiscal Councils in the European Union: Agents, Trustees or Orchestrators of Fiscal Discipline?

This article shows that the troika institutions — the European Commission, the European Central Bank (ECB) and the International Monetary Fund (IMF) — formed a technocratic consensus about the desirability of establishing national fiscal councils in the European Union (EU). Considerable disagreement existed, however, with regards to their design features. Each institution promoted a distinct mode of indirect governance by ranking national fiscal councils depending on their adopted governance model (agent, trustee or orchestrator). This persuasion through entrepreneurial bench- marking constitutes an important mechanism by which member states were nudged to adopt a distinct fiscal council model. Preference heterogeneity among the troika members ultimately prevented the spread of a one-size-fits-all fiscal council in the EU.

Macroeconomic Legal Trends in the EU11 Countries

This contribution deals with the macroeconomic legal trends in the Eastern member states of the European Union, so called EU11: Bulgaria, Croatia, the Czech Republic, Estonia, Latvia, Lithuania, Hungary, Poland, Romania, Slovakia and Slovenia. The paper discusses the development from the 1990s to nowadays, emphasizing the initial changes and the consolidation after the financial crisis. Therefore, the fiscal policy bears a major attention: fiscal and budgetary stability, government debts, fiscal controls (auditing and independent fiscal councils), for a more comprehensive overview, some ports of the monetary policy will be examined: national banks and price stability. The main aim of the contribution is to confirm or disprove the hypothesis that there is any identifiable or verifiable correlation between the legislation and the macroeconomic trends: sustainable balanced budget and government debt, economic growth, inflation. The research is based on law and economics, especially law and finance methodology with quantitative analysis, because of the cross-discipline nature of the topic. The paper contains some comparative statistics to evaluate the certain results upon figures, because it is even important to match the legal provisions with the economic performance.

SPX Flow Inc, USA

Countries increasingly rely on independent fiscal councils to constrain policymakers’ discretion and curb the bias towards excessive deficits and pro-cyclical policies. Since fiscal councils are often recent and heterogeneous across countries, assessing their impact is challenging. Using the latest (2016) vintage of the IMF Fiscal Council Dataset, we focus on two tasks expected to strengthen fiscal performance: the preparation or assessment of forecasts, and the monitoring of compliance with fiscal rules. Tentative econometric evidence suggests that the presence of a fiscal council is associated with more accurate and possibly less optimistic fiscal forecasts, as well as greater compliance with fiscal rules.

ОСОБЕННОСТИ ДЕЯТЕЛЬНОСТИ НЕЗАВИСИМОГО БЮДЖЕТНОГО СОВЕТА В ГЕРМАНИИ

ОСОБЕННОСТИ ДЕЯТЕЛЬНОСТИ НЕЗАВИСИМОГО БЮДЖЕТНОГО СОВЕТА В ГЕРМАНИИ

Public finance in India: some reflections

The paper analyses important issues in Indian public finance in the context of India’s economic development. Given the predominance of working population and with children in the age group 0–14 constituting over 40% of the population, government finance has a critical role not only in protecting life and property but also in creating physical infrastructure to expand economic activities to generate employment opportunities and in providing social infrastructure to empower them to get productively employed. The analysis of public spending, however, shows that spending on education and healthcare is woefully inadequate and expenditures on interest payments, subsidies and transfers have crowded out spending on physical and social infrastructures. The main reason for the above phenomenon has to be found in the low levels of taxation apart from lopsided priorities. The low tax ratio is due to the exemption to agricultural incomes, widespread tax preferences due to multiple objectives loaded into tax policy, tax abuse by multinationals and poor tax administration. The low tax collection is also the reason for the persistence of large deficits and debt. Despite the enactment of fiscal responsibility legislation, containing the government deficits and debt has been a major challenge and the targets are diluted, new concepts created and repeatedly postponed. The paper argues that there is a strong case for creating a fiscal council by amending the FRBM Act which should be appointed by the Parliament and should be reporting to it as recommended by the Fourteenth Finance Commission. This is in contrast to the Fiscal Review Committee’s recommendation according to which the Fiscal council should be appointed by the Finance Ministry and should report to it.

Independent Fiscal Councils: Recent Trends and Performance

Countries increasingly rely on independent fiscal councils to constrain policymakers' discretion and curb the bias towards excessive deficits and pro-cyclical policies. Since fiscal councils are often recent and heterogeneous across countries, assessing their impact is challenging. Using the latest (2016) vintage of the IMF Fiscal Council Dataset, we focus on two tasks expected to strengthen fiscal performance: the preparation or assessment of forecasts, and the monitoring of compliance with fiscal rules. Tentative econometric evidence suggests that the presence of a fiscal council is associated with more accurate and possibly less optimistic fiscal forecasts, as well as greater compliance with fiscal rules.

Independent Fiscal Councils: Recent Trends and Performance

Countries increasingly rely on independent fiscal councils to constrain policymakers’ discretion and curb the bias towards excessive deficits and pro-cyclical policies. Since fiscal councils are often recent and heterogeneous across countries, assessing their impact is challenging. Using the latest (2016) vintage of the IMF Fiscal Council Dataset, we focus on two tasks expected to strengthen fiscal performance: the preparation or assessment of forecasts, and the monitoring of compliance with fiscal rules. Tentative econometric evidence suggests that the presence of a fiscal council is associated with more accurate and less optimistic fiscal forecasts, as well as greater compliance with fiscal rules.

The Creation of the Fiscal Council in Estonia: Exploring the Explanations for Its Institutional Design

In this paper, we explore the creation of the fiscal council (FC) in Estonia, using the perspectives of different strands of institutionalism. Our analysis shows that the institutional design of the FC was influenced, in tandem, by principal‐agent considerations, transaction costs, existing institutional configurations, path dependence, and normative concerns of the bureaucratic agents in charge of creating the new body. We conclude that in order to understand and explain the motives and factors involved in institutional design, the explanatory angles provided by rational choice, historical and sociological institutionalism should be viewed as complementary rather than contradictory.

An examination of independent fiscal councils and their orientation to the future and policy making

The aim of this paper is to review the rationale, nature and operation of independent fiscal councils (IFCs) in order to gain insights into how futures are being configured at executive levels of government and to examine how futures could be incorporated in policy making. The emphasis IFCs have placed on non-partisanship, transparency and forecasting is viewed as reflecting a particular understanding of the problem of public debt and a limited understanding of the future and policy making. Located within the context of increasing technocratic tendencies, it is argued that IFCs can be seen as part of efforts to secure the de-politicisation of policy making. Attempts to secure the de-politicisation of policy making may at best, be considered laudable, but naïve, and at worst, represents an ideological sleight of hand in attempts to colonise the future. Moving forward, it is argued that strategic foresight can make a vital contribution to an open form of policy making that deepens and extends an understanding of what the future could be - the necessary ficta of policy making.

Structural Fiscal Rule: A Better Discipline than a Fiscal Council

In 2011 we recommended the application of a structural fiscal rule to the case of Mexico, given the country's repetitive inability to implement a genuine fiscal reform. At that time, we said that due to the absence of a fiscal reform that increases tax revenues significantly, Mexico needs to adopt a structural correction in its public finance through the implementation of a rule. The structural rule would eliminate budget volatility and would give fiscal policy more countercyclical power. Since the structural rule promotes fiscal certainty, the country would reinforce investors' confidence and would strengthen public finances. We established that the rule would not substitute the fiscal reform needed, but it would make the reform less urgent since it would introduce a structural discipline in the government expenditure, which would also make the budgeting process more efficient. At the end of 2012, the newly elected government announced it intended to apply a structural balance rule, but no such rule was ever applied. In 2014, a fiscal reform was implemented. However, given the absence of the structural rule, the gains generated by the reform vanished as a result of more government expenses. An increasing fiscal imbalance and accelerating debt were the costs paid by the country for not implementing the fiscal rule. More recently, an independent fiscal council has been recommended by the IMF. In Part 1 of this paper, we reproduce the structural fiscal rule proposed in 2011, highlighting its main advantages. In Part 2, we make an assessment on the nature of a fiscal council and the main weaknesses for its application in Mexico.

Strengthening Post‐Crisis Fiscal Credibility: Fiscal Councils on the Rise – A New Dataset

AbstractInstitutions that aim to constrain policy discretion in order to promote sound fiscal policies are once again at the forefront of the policy debate. Interest in fiscal councils – independent watchdogs active in the public debate – has grown rapidly in recent years. In this paper, we present the first cross‐country dataset summarising key characteristics of fiscal councils among International Monetary Fund members. The data document a surge in the number of fiscal councils since the 2008–09 economic and financial crisis, and also illustrate that well‐designed fiscal councils are associated with stronger fiscal performance and better macro‐economic and budgetary forecasts. Key features of effective fiscal councils include operational independence from politics, the provision or public assessment of budgetary forecasts, a strong presence in the public debate and the monitoring of compliance with fiscal policy rules.

Independent Fiscal Councils: Neglected Siblings of Independent Central Banks? An EU Perspective

AbstractGovernance of monetary and fiscal policy have followed diverging paths. Since the late 1980s monetary policy has been delegated to independent central banks. By contrast, fiscal stabilization remained in political hands but has progressively been constrained by rules; the Stability and Growth Pact in the EU is a prominent case in point. While delegation and independence eliminated the inflation bias, fiscal policy still suffers from a deficit bias as enforcement of rules remains difficult. A logical extension of all attempts to progressively tie the hands of politics would be to carve out the stabilization function from the broader field of fiscal policy and to delegate it to national independent fiscal councils. Apart from addressing the political economy behind the deficit bias, such a step would facilitate a better co‐ordination of macroeconomic policies in Economic and Monetary Union.

The impact of fiscal councils on the budgetary consolidation

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.

Determinantes dos Papéis dos Conselhos de Administração de Empresas Brasileiras

Resumo O presente estudo analisa a relação entre os papéis gerencial e supervisório dos Conselhos de Administração de 108 empresas listadas no Novo Mercado da BM&FBovespa e as variáveis de governança corporativa reportadas pela literatura acadêmica que, potencialmente, possam interferir na dominância de cada função nas reuniões dos Conselhos. A determinação do papel foi realizada por análise de conteúdo, adaptando o modelo de Schwartz-Ziv e Weisbach (2013), enquanto a avaliação das determinantes foi realizada por meio de Regressões Beta e Logística, utilizando-se, respectivamente, a proporção de tópicos gerenciais em relação ao total, e uma classificação binária de acordo com a dominância. Foram avaliadas as Atas e os Formulários de Referências divulgados para os anos-base de 2010 a 2013, sendo analisadas apenas empresas que apresentassem os dados referentes a todo o período. Detectou-se que os Conselhos exercem papéis gerenciais com maior frequência que o supervisório, e que as variáveis mais importantes para a determinação do papel são a presença de um ex-CEO no Conselho de Administração e a existência de um Conselho Fiscal instalado, ambos contribuindo positivamente para a predominância do Gerencial sobre o Supervisório.

Fiscal Council and Pre-election Platforms Evaluation: A Scenario for Greece

Fiscal Council and Pre-election Platforms Evaluation: A Scenario for Greece