Xavier Debrun, Luc Eyraud, Andrew Hodge, Victor Lledo, Catherine Pattillo, (2018), “‘Second-generation’ fiscal rules: From stupid to too smart”, VoxEU, 22 Μαΐου
The ongoing debate on fiscal governance in the euro area – and by implication on the implied degree of fiscal discipline – reminds us that four decades after Kydland and Prescott (1977), the debate on ‘rules versus discretion’ still rages on. The basic problem is that policymakers’ ability to respond at any time to unforeseen circumstances (discretion) comes at the risk of accommodating short term demands that undermine desirable long-term goals, including price stability and fiscal responsibility. For monetary policy, the solution proved swift and effective – delegating policy levers to independent experts with a mandate to keep inflation low and predictable. Today, independent and accountable central bankers are the norm. We summarise our recent research on fiscal rules and how they can be used to mitigate discretionary excesses (Eyraud et al. 2018).
As usual, fiscal policy is more complicated (Leeper 2010), and fixing the commitment problem is no exception. For a start, the term ‘fiscal delegation’ is an oxymoron. Decisions to extract tax money and use it for the ‘common good’ belong to taxpayers’ elected representatives, not to appointed experts (e.g. Alesina and Tabellini 2007). Thus, if the consequences of unconstrained fiscal discretion are deemed bad enough, constraining the latter through delegation to technocrats is not the way to safeguard against unwanted behaviour. This is where fiscal rules – defined as binding numerical constraints on aggregate indicators of fiscal performance (Kopits and Symansky 1998) – come into play. In the same way as speed limits aim to prevent reckless driving, caps on government deficits, debts, or expenditures are meant to deter fiscal profligacy.
Σχετικές Αναρτήσεις
- Roel Beetsma, Martin Larch, (2018), «Risk reduction and risk sharing in EU fiscal policymaking: The role of better fiscal rules», VoxEU, 9 Μαΐου
- Sebastian Dullien, (2018), «Blind spots and unintended consequences of the 14 economists’ Policy Insight», VoxEU, 11 Απριλίου