Template-Type: ReDIF-Article 1.0
Author-Name: Ludovit Ódor
Author-Name: Gábor P. Kiss
Author-Workplace-Name: Slovakian Budgetary Council, Magyar Nemzeti Bank
Author-Email: odor@rrz.sk
Title: Back to basics – good indicators for good fiscal institutions!
Abstract: A proper fiscal framework should ensure fiscal sustainability while avoiding procyclicality
of fiscal policy. As a prerequisite, fiscal rules should be based on numerical indicators that
are conducive to both of these basic objectives. In this paper, we discuss problems that
the existing European fiscal architecture fails to address, even as it becomes increasingly
more complex and rule-based. We argue that a lack of robust, simple indicators makes the
enforcement of rules and/or the prevention of procyclicality of fiscal policy very challenging.
In our view, a decentralised framework would be better suited to fight against the deficitbias
in Europe. Accordingly, we propose that the first line of defence against irresponsible
fiscal policy be provided by national, country-specific rules, with active monitoring of
local fiscal councils. In this model, the community level would be responsible for checking
compliance with minimum standards defined for local fiscal frameworks and for EU-wide
coordination of policies instead of yearly fine-tuning of national budgets.
Classification-JEL: E32, E62, H62, H63
Keywords: fiscal framework, fiscal indicators, cyclical adjustment, fiscal council
Journal: Financial and Economic Review
Pages: 125-151
Volume: 13
Issue: 4
Year: 2014
File-URL: http://english.hitelintezetiszemle.hu/letoltes/6-odor-p-kiss-en.pdf
Handle: RePEc:mnb:finrev:v:13:y:2014:i:4:p:127-153