Assessing the impact of fiscal rules on the cyclicality of government expenditures

A. L. Kudrin (), I. A. Sokolov () and O. V. Suchkova ()

Voprosy Ekonomiki, 2023, issue 5

Abstract: The paper analyzes the impact of fiscal rules on the cyclicality of non- interest public spending. It is concluded that for both developed and developing countries for 1995—2019 non-interest public spending is procyclical, and having at least one fiscal rule at the national level reduces the procyclicality of spending. The reaction to the introduction of a fiscal rule depends on the existence of institutional conditions for its successful application. The presence and rigidity of the rules are offset by the possible non-compliance with them. Fiscal rules are not a sufficient condition for a counter-cyclical fiscal policy and do not guarantee a solution to the problems of debt burden and stabilization of expenditures. Hardly 22 out of 49 countries that have applied at least one fiscal rule for 5 years and for which data for at least 10 years of non-interest spending are available show counter-cyclical non-interest spending behavior, and only 7 of them managed to reduce their debt burden after the introduction of a system of fiscal restrictions.

Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:nos:voprec:y:2023:id:4283

DOI: 10.32609/0042-8736-2023-5-5-22

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