Fiscal Rules and Fiscal Councils: Recent Trends and Performance during the COVID-19 Pandemic

By Hamid R Davoodi, Paul Elger, Alexandra Fotiou, Daniel Garcia-Macia, Xuehui Han, Andresa Lagerborg, Waikei R Lam, Paulo A Medas

January 27, 2022

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Hamid R Davoodi, Paul Elger, Alexandra Fotiou, Daniel Garcia-Macia, Xuehui Han, Andresa Lagerborg, Waikei R Lam, and Paulo A Medas. Fiscal Rules and Fiscal Councils: Recent Trends and Performance during the COVID-19 Pandemic, (USA: International Monetary Fund, 2022) accessed November 23, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

Adoption of fiscal rules and fiscal councils continued to increase globally over the last decades based on two new global datasets. During the pandemic, fiscal frameworks were put to test. The widespread use of escape clauses was one of the novelties in this crisis, which helped provide policy room to respond to the health crisis. But the unprecedented fiscal actions have led to large and widespread deviations from deficit and debt limits. The evidence shows that fiscal rules, in general, have been flexible during crises but have not prevented a large and persistent buildup of debt over time. Experience shows that deviations from debt limits are very difficult to reverse. The paper also presents evidence on the benefits of a good track record in abiding by the rules. All these highlight the difficult policy choices ahead and need to further improve rules-based fiscal frameworks.

Subject: Asset and liability management, COVID-19, Debt limits, Fiscal councils, Fiscal governance, Fiscal policy, Fiscal rules, Health

Keywords: COVID-19, Debt limits, Deficit limits, Dynamics of deviation, European Union, Fiscal councils, Fiscal Councils, Fiscal governance, Fiscal rule, Fiscal rules, Fiscal Rules, Global, IMF working paper No.22, Independent fiscal institutions., Pandemic, Policy choice, Policy room, Public debt

Publication Details

Pages:

41
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2022/011
Stock No:

WPIEA2022011
ISBN:

9798400200472
ISSN:

1018-5941

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