Working Paper: CEPR ID: DP12826
Authors: Roel Beetsma; Xavier Debrun; Xiangming Fang; Young Kim; Victor Lledo; Samba Mbaye; Xiaoxiao Zhang
Abstract: 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.
Keywords: independent fiscal councils; fiscal rule compliance; fiscal forecasts
JEL Codes: E61; E62; H11; H62
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Strength of fiscal rules (E62) | Effectiveness of Independent Fiscal Council (IFC) (H68) |
| Independent Fiscal Council (IFC) (H68) | More accurate budgetary forecasts (H68) |
| Independent Fiscal Council (IFC) (H68) | Compliance with fiscal policy rules (E62) |