Fiscal rules, fiscal space and procyclical fiscal policy

Arbeitspapier

In this paper we analyse the interaction of fiscal rules and fiscal space. We find strong evidence for fiscal rules being associated with higher fiscal space. Furthermore, the analysis shows that countries with more fiscal space tend to have higher discretionary expenditures, but that this effect is significantly reduced if fiscal rules are in place. A similar effect can be observed for the procyclicality of fiscal policy, which is significantly higher in an environment of ample fiscal space, while this difference is reduced with fiscal rules. Regarding the different types of fiscal rules, we find the strongest results for expenditure rules and to a lesser extent for balanced budget rules, but none for debt rules.

Object Details

• ISBN: 978-92-899-1685-1
• Language: Englisch

References and Relationships

• Bibliographic citation: Series: ECB Working Paper ; No. 1872

Classification and Topics

• Classification: Wirtschaft ; Policy Objectives; Policy Designs and Consistency; Policy Coordination ; Fiscal Policy ; National Budget, Deficit, and Debt: General
• Subject: discretionary fiscal policy ; fiscal rules ; fiscal space ; procyclicality

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Nerlich, Carolin ; Reuter, Wolf Heinrich
• Event: Veröffentlichung
• (who): European Central Bank (ECB)
• (where): Frankfurt a. M.
• (when): 2015

Further information

• DOI: doi:10.2866/521587
• Handle: http://hdl.handle.net/10419/154305
• Last update: 10.03.2025, 11:42 AM CET