How To Calibrate Fiscal Rules

Author : Luc Eyraud
Publisher : International Monetary Fund
ISBN 13 : 1484337301
Total Pages : 28 pages
Book Rating : 4.01/5 ( download)

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Download or read book How to Calibrate Fiscal Rules written by Luc Eyraud and published by International Monetary Fund. This book was released on 2018 with total page 28 pages. Available in PDF, EPUB and Kindle. Book excerpt: This note provides guidance on how to calibrate fiscal rules, that is, how to determine the thresholds (ceiling, floor, or target) for specific fiscal aggregates constrained by rules. The note focuses, more specifically, on the calibration of the debt, balance, and expenditure rules. The note is divided into four sections. The first section discusses general principles used to calibrate rules. The second section reports international evidence on the numerical ceilings used in existing rules. The third and fourth sections provide guidance on the calibration of the debt ceiling and the operational rules (fiscal balance and expenditure rules). This is one of two guidance notes on the design of fiscal rules; the other one focuses on rule selection. The two exercises are linked: if a fiscal framework had to be built from scratch, rules would need to be selected and calibrated at the same time.

Author : Luc Eyraud
Publisher : International Monetary Fund
ISBN 13 : 1513527037
Total Pages : 29 pages
Book Rating : 4.31/5 ( download)

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Download or read book How to Design Subnational Fiscal Rules written by Luc Eyraud and published by International Monetary Fund. This book was released on 2020-02-25 with total page 29 pages. Available in PDF, EPUB and Kindle. Book excerpt: This note discusses how to design subnational fiscal rules, including how to select them and calibrate them. It expands on the guidance provided at the national level on rule selection and calibration in IMF (2018a) and IMF (2018b). Thinking on subnational fiscal rules is still evolving, including their effectiveness (for example, Heinemann, Moessinger, and Yeter 2018; Kotia and Lledó 2016; Foremny 2014), and this note only provides a first analysis based on international experiences and the technical assistance provided by the IMF. Main findings are summarized in Box 1. The note is divided into five sections. The first section defines fiscal rules. The second section discusses the rationale for subnational rules. The third section provides some guidance on how to select the appropriate rule(s) and whether they should differ across individual jurisdictions. The fourth section explores the issue of flexibility by looking at how rules should adjust to shocks. Finally, the last section focuses on the “calibration” of the rules.

Author : Olusegun Ayodele Akanbi
Publisher : International Monetary Fund
ISBN 13 :
Total Pages : 23 pages
Book Rating : 4.08/5 ( download)

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Download or read book Calibrating Fiscal Rules written by Olusegun Ayodele Akanbi and published by International Monetary Fund. This book was released on 2023-07-31 with total page 23 pages. Available in PDF, EPUB and Kindle. Book excerpt: This technical note assesses how large shocks from natural disasters are key source of vulnerabilities for public finances. It extends the IMF Fiscal Affairs Department calibration toolkit by developing a methodology to calibrate fiscal rules in the event of natural disaster shocks and the possibility of implementing climate adaptation and mitigation measures. The features incorporated in this technical note would allow the calibration of a prudent medium-term fiscal anchor as well as annual budgetary limits that ensure the sustainability of public finances. The note is accompanied by a set of toolkits that provides instructions on calibrating a medium-term debt anchor and corresponding operational rules in the presence of natural disaster risks, accounting for climate investment and other mitigation mechanisms.

Author : Juan Carlos Hatchondo
Publisher : International Monetary Fund
ISBN 13 : 1463933150
Total Pages : 28 pages
Book Rating : 4.59/5 ( download)

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Download or read book Fiscal Rules and the Sovereign Default Premium written by Juan Carlos Hatchondo and published by International Monetary Fund. This book was released on 2012-01-01 with total page 28 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper finds optimal fiscal rule parameter values and measures the effects of imposing fiscal rules using a default model calibrated to an economy that in the absence of a fiscal rule pays a significant sovereign default premium. The paper also studies the case in which the government conducts a voluntary debt restructuring to capture the capital gains from the increase in its debt market value implied by a rule announcement. In addition, the paper shows how debt ceilings may reduce the procyclicality of fiscal policy and thus consumption volatility.

Author : Mr.Serhan Cevik
Publisher : International Monetary Fund
ISBN 13 : 1498305032
Total Pages : 20 pages
Book Rating : 4.37/5 ( download)

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Download or read book Anchor Me: The Benefits and Challenges of Fiscal Responsibility written by Mr.Serhan Cevik and published by International Monetary Fund. This book was released on 2019-03-25 with total page 20 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper discusses the benefits and challenges of implementing a rule-based fiscal responsibility framework, using the Philippines as a case study. It estimates structural measures of the fiscal stance over the period 1980–2016 and applies a stochastic simulation model to determine the optimal set of fiscal rules. The empirical analysis indicates that discretionary fiscal policy has been procyclical, and the degree of procyclicality has increased in recent years. While the national government’s non-binding ceiling on the overall budget deficit is helpful, it does not constitute an appropriate operational target to guide fiscal policy over the economic cycle and necessarily ensure that the fiscal stance meets the government’s intertemporal budget constraint. To this end, using stochastic simulations, this paper makes the case for a well-designed fiscal responsibility law that enshrines explicit fiscal rules designed for countercyclical policy and long-term debt sustainability, and an independent fiscal council to improve accountability and transparency.

Author : Michael Kumhof
Publisher : International Monetary Fund
ISBN 13 :
Total Pages : 48 pages
Book Rating : 4.85/5 ( download)

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Download or read book Simple, Implementable Fiscal Policy Rules written by Michael Kumhof and published by International Monetary Fund. This book was released on 2009-04 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper analyzes the scope for systematic rules-based fiscal activism in open economies. Relative to a balanced budget rule, automatic stabilizers significantly improve welfare. But they minimize fiscal instrument volatility rather than business cycle volatility. A more aggressively countercyclical tax revenue gap rule increases welfare gains by around 50 percent, with only modest increases in fiscal instrument volatility. For raw materials revenue gaps the government should let automatic stabilizers work. The best fiscal instruments are targeted transfers, consumption taxes and labor taxes, or, if it enters private utility, government spending. The welfare gains are significantly lower for more open economies.

Author : International Monetary Fund. Fiscal Affairs Dept.
Publisher : International Monetary Fund
ISBN 13 : 1475586264
Total Pages : 67 pages
Book Rating : 4.68/5 ( download)

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Download or read book Paraguay written by International Monetary Fund. Fiscal Affairs Dept. and published by International Monetary Fund. This book was released on 2017-03-15 with total page 67 pages. Available in PDF, EPUB and Kindle. Book excerpt: The enactment of the Fiscal Responsibility Law in 2013, which came into force in 2015, was a major achievement toward strengthening Paraguay’s fiscal framework. Its implementation has nonetheless been complex, with slippages occurring in the first year of its enactment. Concerns have also emerged about the current design of the nominal balance rule, which is perceived as excessively rigid. Given the high volatility of fiscal revenues, the rule translates into an unstable path of public expenditure and does not provide sufficient space for countercyclical policies. Paraguay’s tight fiscal deficit ceiling may also constrain capital expenditure plans, possibly to the detriment of overall economic development needs. The authorities have decided to replace the nominal balance rule with a structural balance rule, starting in 2019, to achieve a more stable path of public expenditure and better link it to the medium-term objectives of fiscal policy. The government is also considering modifications of the Fiscal Responsibility Law in order to enhance public investment without damaging the credibility of the rule-based framework.

Author : Mr. Antonio David
Publisher : International Monetary Fund
ISBN 13 :
Total Pages : 35 pages
Book Rating : 4.57/5 ( download)

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Download or read book Strengthening the WAEMU Regional Fiscal Framework written by Mr. Antonio David and published by International Monetary Fund. This book was released on 2022-03-04 with total page 35 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper assesses the adequacy and effectiveness of the WAEMU fiscal framework along three pillars that have proven to effectively support fiscal discipline in monetary unions—common fiscal rules (including adequacy of numerical ceilings as well as elements of design and enforcement), shared public financial management systems, and coordination mechanisms for decentralized fiscal policies. We undertake a calibration of regional debt and fiscal deficit ceilings taking into account different macroeconomic tradeoffs and risks and conclude that numerical ceilings that prevailed before the suspension of the fiscal rules remain adequate and strike the right balance between growth and fiscal sustainability. The paper also proposes reform options to strengthen the WAEMU regional fiscal surveillance framework, with a view to more effectively supporting fiscal discipline.

Author : Francesca Caselli
Publisher : International Monetary Fund
ISBN 13 :
Total Pages : 37 pages
Book Rating : 4.67/5 ( download)

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Download or read book The Return to Fiscal Rules written by Francesca Caselli and published by International Monetary Fund. This book was released on 2022-10-11 with total page 37 pages. Available in PDF, EPUB and Kindle. Book excerpt: Governments face difficult policy trade-offs with record debt levels, tightening monetary policies, and urgent demands, including food and energy crises, the climate agenda, and population aging. Governments need to communicate fiscal plans to reduce debt sustainability risks and promote consistent macroeconomic policies. Many envisage a return to fiscal rules that had been suspended during the pandemic to strengthen credibility. This situation offers an opportunity to rethink fiscal rules and determine how governments can make fiscal policy more agile, including in responding to crises, without undermining fiscal sustainability. A risk-based medium-term fiscal framework that combines standards, rules, and strengthened institutions would strike a better balance between flexibility and credibility.

Author : Mr.Serhan Cevik
Publisher : International Monetary Fund
ISBN 13 : 1513519867
Total Pages : 22 pages
Book Rating : 4.69/5 ( download)

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Download or read book Back to the Future: Fiscal Rules for Regaining Sustainability written by Mr.Serhan Cevik and published by International Monetary Fund. This book was released on 2019-11-08 with total page 22 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper assesses the cyclicality and sustainability of fiscal policy in Belize and applies a stochastic simulation model to determine the optimal set of fiscal rules. The empirical analysis shows that fiscal policy in Belize has been significantly procyclical and unsustainable much of the period since 1976. While the government’s recent commitment to maintain a primary surplus of at least 2 percent of GDP until 2021 is supporting debt reduction, stochastic simulations indicate that further improvement in the primary balance is necessary to reliably bring the debt-to-GDP ratio to a sustainable path. Given Belize’s history of large economic shocks, this paper proposes explicit fiscal rules designed for countercyclical policy and debt sustainability. It recommends integrating such rules into a well-designed fiscal responsibility law and establishing an independent fiscal council to improve accountability and transparency.