Toward a Robust Fiscal Framework for Iceland: Motivation and Practical Suggestions

October 1, 2007

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Format: Chicago

Anthony M Annett. Toward a Robust Fiscal Framework for Iceland: Motivation and Practical Suggestions, (USA: International Monetary Fund, 2007) accessed December 22, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

Expenditure in Iceland, especially related to the government wage bill, has tended to move in a procyclical manner, related to the fragmentation of political decision making. Iceland's elevated macroeconomic volatility reinforces these tendencies, as large booms unleash greater fiscal pressures as well as procyclical revenue elasticities that magnify these underlying strains. To improve its fiscal framework, Iceland could look to the experience of countries like Belgium and the Netherlands. In particular, it could adopt binding nominal expenditure rules, independent forecasts, and use representative committees to lay out medium-term targets across different levels of government.

Subject: Budget planning and preparation, Current spending, Expenditure, Fiscal policy, Government consumption

Keywords: Government, Government fractionalization, Wage government consumption, WP

Publication Details

Pages:

25
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2007/235
Stock No:

WPIEA2007235
ISBN:

9781451867992
ISSN:

1018-5941

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