Expenditure rules for a sounder fiscal position: New perspectives for Italy

Alessandra Cepparulo and Luisa Giuriato

Politica economica, 2012, issue 2, 197-228

Abstract: The introduction of expenditure rules in the next future in Italy has beenmade viable by recent domestic and European budget reforms. Expenditure rules could improve the difficult conditions of the Italian public finances and could remedy to some of itsmain flaws, in particular, «unexpected» budgetary slippages and poor expenditure control.The analysis is focused on the comparison of some relevant characteristics of three kinds ofexpenditure rules (a ceiling set in terms of a rate of expenditure growth, a fixed term/rolling basis spending limit and an expenditure ceiling within a debt brake mechanism) and onthe impact that their adoption could have on the soundness of the country's fiscal position.The expenditure counterfactual paths we trace use a real-time data set covering all stagesof the budget process. Political acceptability, coherence with the EU and the domestic fiscalframeworks, predictability of resources and transparency differ according to the ruleadopted and prevent a clear ranking of the expenditure rules to single out the best solution.However, the expenditure ceilings within the debt brake unquestionably grant better resultsin terms of fiscal performance.

Keywords: expenditure policies; expenditure rules; sustainability; Italy; fiscal rules. (search for similar items in EconPapers)
Date: 2012
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