Fiscal rules: Excessive limitation or indispensable instrument of fiscal sustainability?

2016 ◽  
pp. 5-29 ◽  
Author(s):  
E. Gurvich ◽  
I. Sokolov
Keyword(s):  
Historical Data ◽  
Federal Budget ◽  
Fiscal Sustainability ◽  
Fiscal Rules ◽  
External Shocks ◽  
Base Price ◽  
Depth Analysis ◽  
Fiscal Balance ◽  
Lower Size ◽  
Budget Expenditure

In-depth analysis of international and Russia’s experiences with implementing fiscal rules is presented. Theoretical and empirical evidences are suggested in favor of retaining the present fiscal rules with some modifications aimed at ensuring: a) a relatively stable level of federal budget expenditure with guaranteed full execution of all commitments; b) countercyclical fiscal policy, based on flexibleand proper reaction to revenue changes; and c) robustness of fiscal rules to internal and external shocks. The main new features suggested include modified calculation of the oil base price, different measurement of cyclical fiscal revenues, lower size of structural fiscal balance, and thorough specification of sources for each item of the balance. The modified rules envisage increased flexibility by relaxing to a pre-set extent and for a pre-set time spending limits in response to extreme shocks. The suggested version of fiscal rules has been tested by application to historical data for 2005-2015, and macro projections for 2015-2025.

Assessing Sustainability of Russia's Federal Budget in the Crisis Period

2011 ◽  
pp. 26-38 ◽  
Author(s):  
E. Timokhina
Keyword(s):  
Federal Budget ◽  
Fiscal Sustainability ◽  
Fiscal Rules ◽  
Global Crisis ◽  
Crisis Period

The article estimates the effectiveness and adequacy of existing instruments and measures to ensure fiscal sustainability in Russia. Major shocks to Russia's federal budget under conditions of the global crisis are indicated. The author recommends to return to the fiscal rules that promote fiscal sustainability.

Fiscal rules as an instrument of balanced budget policy

2017 ◽  
pp. 5-32 ◽  
Author(s):  
A. Kudrin ◽  
I. Sokolov
Keyword(s):  
Structural Changes ◽  
Federal Budget ◽  
Fiscal Rules ◽  
External Shocks ◽  
Current Version ◽  
Economic Cycle ◽  
Fiscal Rule ◽  
Budget Policy

In the article the authors attempt to understand the extent to which fiscal rules that were applied earlier in Russia and are in force at the present time are systemic and balanced, which requirements must be met by an effective fiscal rule in current conditions. So, according to the authors, fiscal rules should allow to adapt the budget to the requirements of financing structural changes in the economy and to maintain control over long-term budgetary sustainability. However, the new fiscal rules, introduced in July 2017, imposing excessively tight restrictions on the volume of federal budget expenditures, will not allow to provide the necessary amount of expenditures for economic development and financing of structural reforms. In this regard, a consistent transformation of the current version of fiscal rules to the framework on the basis of a zero structural balance is justified. The preparation of federal budget, balanced on a cyclical basis, can provide a relatively stable level of expenditure, regardless of the volatility of oil prices and the economic cycle, thereby realizing the countercyclical nature of fiscal policy and reducing the budget vulnerability to internal and external shocks. The effectiveness of the proposed fiscal rule is verified through modeling on data for 2007-2016. In particular, if we had used the proposed rule starting from the second half of the 2000s, it would have been possible to curb the growth of federal budget expenditures that began with the anti-crisis measures of 2009, halve the level of public debt and accumulate sovereign reserves in the amount of up to 25% of GDP. At the same time, the proposed rule requires high quality of macroeconomic and budgetary forecasting.

Analysis of tax-spend nexus for Russian regional budgets

2020 ◽  
pp. 5-29
Author(s):  
Evsey T. Gurvich ◽  
Natalia A. Krasnopeeva
Keyword(s):  
Economic Growth ◽  
Fiscal Policy ◽  
Causal Relationship ◽  
National Economy ◽  
Federal Budget ◽  
Fiscal Rules ◽  
Fiscal Discipline ◽  
Federal Level ◽  
Regional Budgets ◽  
Econometric Technique

We study the tax-spend nexus for Russian regional budgets. Causal relationship running from taxing to spending is found, thus supporting the concept “tax and spend” suggested by M. Friedman. Next, elasticity of expenditure by revenue is estimated for a panel of 80 regional budgets basing on data for 2000—2017. Estimates are in the range of 0.72 to 0.78 (depending on the econometric technique), which exceeds elasticity for the federal budget more than twice. This evidences that fiscal policy at the sub-federal (as distinct from the federal) level has clear pro-cyclical nature. Besides, the largest sensitivity of expenditure to revenue shocks is found for the item “national economy”, implying marked adverse implications for economic growth. We suggest to mitigate this effect by modifying fiscal rules for sub-federal budgets. They are currently aimed primarily at enhancing fiscal discipline, with less emphasis on countercyclical policy, insulating economy from fiscal shocks.

scholarly journals Concept of Innovative Fiscal Policy: Theory and Empirical Evidence

Competitio ◽  
2020 ◽  
Vol 10 (2) ◽  
Author(s):  
Oliver Kovacs
Keyword(s):  
Fiscal Policy ◽  
Social Trust ◽  
Disruptive Innovation ◽  
Jel Classification ◽  
Fiscal Sustainability ◽  
Growth Potential ◽  
Fiscal Rules ◽  
Future Challenges ◽  
The Government ◽  
The One

This contribution addresses the question of what are the main constituents of an innovative fiscal policy in the context of sustainability. We apply the concept of sustaining and disruptive innovation to fiscal policy. On the one hand, innovative fiscal policy is able to be sustaining whereby public finance will incrementally improve without leaving its decisive structure. On the other hand, innovative fiscal policy should be disruptive as well in the context of long term sustainability, whereby the structure of public finances can be profoundly restructured as a reaction to future challenges. By using the Finnish recovery in the early 1990s, we can refine our argument about the use and necessity of the mixture of fiscal rules and independent institutions in favour of fiscal sustainability. We also shed light on the key sources of the expansionary consolidation that emerged in the aftermath of the fiscal adjustment in the early 1990s. We emphasise that innovative fiscal policy with a mixture of legislated fiscal rules and independent fiscal anchor is more likely to be associated with sustainability if the economy has weaker growth potential which does not provide enough social trust towards the consolidation efforts of the government. Journal of Economic Literature (JEL) classification: E61, E62, Q01

scholarly journals Do Fiscal Rules Constrain Fiscal Policy in Romania?

2020 ◽  
Author(s):  
Alina Daniela Vodă ◽  
Gabriela Dobrotă ◽  
Loredana Andreea Cristea ◽  
Bianca Ciocanea
Keyword(s):  
Sustainable Development ◽  
Fiscal Policy ◽  
Granger Causality ◽  
National Level ◽  
Granger Causality Test ◽  
Business Environment ◽  
Economic Life ◽  
Fiscal Sustainability ◽  
Fiscal Rules ◽  
Causality Test

At both macroeconomic and national level, in recent decades, European tax policies have shown a particular interest in addressing the spectrum of risk issues in terms of maturing the business environment and the lack of sustainable development of the economy. In Romania there has been a significant increase in public debt, which is increasingly threatening fiscal sustainability. This is due to fiscal rules that restrict the applicability of fiscal policy to balancing the national economy. However, fiscal policy did not act in the direction of economic recovery during the crisis that started in the last quarter of 2008, which had a negative impact on the Romanian business environment. Objectively, fiscal policy should manifest itself as a general framework of the economy on the basis of which to develop fiscal rules that act in the direction of sustainable development of the business environment and implicitly, of socio-economic life. The research carried out referred to identify how fiscal rules in Romania restrict the application of fiscal policy as well as whether there is an explicit concordance between them. The research methodology aimed to use the ARDL model to apply the Granger causality test, using quarterly data for a set of four indicators, being identified that Romanian fiscal rules restrict fiscal policy. The achieved results highlighted the fact that fiscal rules restrict fiscal policy, being identified a long-run relationship between the analyzed variables and implicitly, a state of instability of the fiscal system in Romania. Keywords: fiscal policy, autoregressive distributed-lagged model, Granger causality test.

scholarly journals Oil rents and fiscal balance in oil dependent economies: do fiscal rules matter?

2017 ◽  
Vol 7 (8) ◽  
pp. 176-201 ◽  
Author(s):  
Adedoyin Festus Fatai ◽  
Liu Cheol ◽  
Adeniyi Oluwatosin A. ◽  
Kabir Muhammad
Keyword(s):  
Fiscal Rules ◽  
Fiscal Balance ◽  
Oil Rents

scholarly journals COVID-19, Fiscal Federalism and Provincial Debt: Have We Reached a Critical Juncture?

2020 ◽  
Vol 53 (2) ◽  
pp. 279-285 ◽  
Author(s):  
Kyle Hanniman
Keyword(s):  
Fiscal Federalism ◽  
Debt Crisis ◽  
Fiscal Sustainability ◽  
Fiscal Rules ◽  
Critical Juncture ◽  
Fiscal Capacity ◽  
Long Run ◽  
Canadian Federalism ◽  
The World

In 2019, Canada's gross subnational debt to GDP was well over 40 per cent, easily the highest in the world (see Figure 1). This level will only grow as the provinces grapple with the pandemic and its fiscal effects. Some believe surging provincial debts have brought Canadian federalism to a critical juncture: they have greatly increased the odds of federal measures to stabilize provincial finances. This article assesses this claim. The cleanest and most balanced path to fiscal sustainability is a combination of enhanced federal transfers, which would bolster provincial fiscal capacity, and national fiscal rules, which would constrain provincial borrowing. But the former is unlikely to restore sustainability on its own, and the latter would require a severe provincial debt crisis, which Canada's existing fiscal federal structures can avoid. COVID-19 has increased the odds of certain reforms, and it is difficult to predict their long-run effects. But any obvious paths to fiscal sustainability remain hidden.

UNIQUELY SINGAPORE'S BUDGETARY SYSTEM AND SOCIAL PROTECTION FINANCING SCHEMES

2014 ◽  
Vol 59 (03) ◽  
pp. 1450024 ◽  
Author(s):  
NGEE CHOON CHIA
Keyword(s):  
Economic Growth ◽  
Economic History ◽  
Social Protection ◽  
Fiscal Sustainability ◽  
Fiscal Rules ◽  
Budgetary Process ◽  
Demographic Dividend ◽  
Welfare Programs ◽  
Fiscal Discipline ◽  
Financing Schemes

This paper examines Singapore's fiscal position and its unique way of financing targeted welfare programs. We examine how reserves are accumulated through fiscal discipline during times of phenomenal economic growth in Singapore and when Singapore was enjoying demographic dividend. The existence of the large accumulated reserves has resulted in particular features of the Singapore's budgetary process, such as fiscal rules, which govern the utilization of revenues from the reserves. Innovative budget implementation, such as Block Budgeting, has helped Singapore to ensure fiscal sustainability. The accumulation of reserves throughout its economic history has afforded Singapore a unique way to fund social protection through special transfers and funds, without having to raise taxes.

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