DP12826 Independent fiscal councils: recent trends and performance

Author(s): Roel Beetsma, Xavier Debrun, Xiangming Fang, Young Kim, Victor Lledo, Samba MBaye, Xiaoxiao Zhang
Publication Date: March 2018
Keyword(s): fiscal forecasts, fiscal rule compliance, Independent fiscal councils
JEL(s): E61, E62, H11, H62
Programme Areas: Public Economics, Macroeconomics and Growth
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=12826

Countries increasingly rely on independent fiscal councils to constrain policymakers' discretion and curb the bias towards excessive deficits and pro-cyclical policies. Since fiscal councils are often recent and heterogeneous across countries, assessing their impact is challenging. Using the latest (2016) vintage of the IMF Fiscal Council Dataset, we focus on two tasks expected to strengthen fiscal performance: the preparation or assessment of forecasts, and the monitoring of compliance with fiscal rules. Tentative econometric evidence suggests that the presence of a fiscal council is associated with more accurate and possibly less optimistic fiscal forecasts, as well as greater compliance with fiscal rules.