The starting point in designing a fiscal framework is to define fiscal targets and instruments. A debt target is the anchor that incorporates expectations about future fiscal policy and is the reference point in designing fiscal rules. Debt rules typically
Summary Designing a Fiscal Framework
The experience of the European Union countries suggests that a debt-to-GDP ratio in excess of 60% is not sustainable. The U.S. has emerged as a major debtor nation, with a debt-to-GDP ratio well above this sustainable level. The debt target
Revenue and Expenditure Rules
Revenue Rules Revenue rules set limits or a target for the level or rate of growth of revenue (Ayuso 2012; Fall and Fournier 2015; Fall et al. 2015; Debrun 2014, 2015).. Revenue rules are often designed to constrain a specific
Long Term Fiscal Sustainability
Historically budgeting rules focused on a four year budget cycle. Budgeting rules focusing on a four year election cycle do not provide the information required for long term financial planning. Only recently have governments begun to issue reports on their
Debt and Deficit Brakes
Important innovations in fiscal rules that have been used successfully in a number of OECD countries are debt brakes and deficit brakes (Merrifield and Poulson 2016, 2017). . One can think of these as trigger mechanisms that automatically adjust the
Budget Balance Rules
Annually Balanced Budget Rules Budget balance rule set a numerical target for the budget either in nominal terms or as a share of GDP (Asatryan et al. 2016). The most ubiquitous of these is the annually balanced budget rule, requiring