OECD Workshop 'Risk to fiscal rules'

Client/Funding Institution

OECD

Abstract

Fiscal rules can play a useful role in tying the hands of policy makers, who finance structural spending commitments with cyclical revenues. However, most fiscal rules contain elements, which are designed for an “ideal” reality and thereby generate noise for an “optimal” fiscal policy. The Workshop was opened by an overview and systematisation of fiscal risks. In order to be well assessed fiscal risks must be correctly identified. Types of risks result from different points of view such as economic, technical, political exogenous, endogenous etc. Estimates and analysis focusing on quantification of real threat of these risks vary from sensitivity analysis to stochastic approach estimates. Contemporary all-tastes fashion approach can be observed while designing fiscal rules as well as fiscal risk estimates and analysis to cover all thinkable aspects of fiscal policy. Criteria leading to risk-free rules such as definition, transparency, enforcement and efficiency cannot be met without a sound institutional framework. At this point the independent fiscal institution providing an independent oversight should mainly focus on fiscal risks the government is not expected to articulate due to its political and international commitments and the assessment of government’s own risk assessment.

Duration

December 2013 - March 2014

wiiw team Leader

Elisabeth Hagen

Keywords: fiscal policy

Countries covered: EU27

Research Areas: Macroeconomic Analysis and Policy

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