Democratic Accountability, Deficit Bias, and Independent Fiscal Agencies

Debrun, Xavier

Democratic Accountability, Deficit Bias, and Independent Fiscal Agencies

No 2011/173, IMF Working Papers from International Monetary Fund

Abstract: Despite growing interest among policymakers, there is no theory of independent fiscal institutions. The emerging literature on "fiscal councils" typically makes informal parallels with the theory of central bank independence, but a very simple formal example shows that such a shortcut is flawed. The paper then illustrates key features of a model of independent fiscal agencies, and in particular the need (1) to incorporate the intrinsically political nature of fiscal policy - which precludes credible delegation of instruments to unelected decisionmakers - and (2) to focus on characterizing "commitment technologies" likely to credibly increase fiscal discipline.

Keywords: WP; public goods; central bank; Fiscal councils; fiscal policy; deficit bias; delegation; deficit contract; fiscal policy decision; deficit ceiling; equilibrium deficit; policy mistake; bias of the kind; assessment of competence; inflation contract; Budget planning and preparation; Central bank autonomy; Inflation; Africa (search for similar items in EconPapers)
Pages: 15
Date: 2011-07-01
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Citations: View citations in EconPapers (14)

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