Optimal Supermajority Threshold for Suspending Fiscal Rules

Ryo Arawatari () and Tetsuo Ono
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Ryo Arawatari: Faculty of Economics, Doshisha University

No 26-05, Discussion Papers in Economics and Business from Osaka University, Graduate School of Economics

Abstract: This paper analyzes the optimal supermajority threshold for approving fiscal rule suspensions within a two-period political turnover model. Faced with the potential loss of power, the incumbent party aims to secure preferred expenditures by increasing public debt. To counteract this, an expenditure rule requiring legislative approval for suspension is introduced. The analysis shows that the voting threshold in parliament should exceed a simple majority, making a simple majority rule suboptimal. A stricter supermajority is necessary when fiscal expenditure rules are more flexible, as it allows for more effective responses to economic fluctuations. Moreover, while higher initial debt levels call for stricter expenditure rules, the optimal supermajority threshold remains unaffected by the debt level. Finally, as political polarization among voters intensifies, the optimal threshold decreases, increasingly aligning with the incumbent party’s preferences.

Keywords: Fiscal rules; Government debt; Political turnover (search for similar items in EconPapers)
JEL-codes: D72 D78 H62 H63 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2026-04
New Economics Papers: this item is included in nep-cdm, nep-mac, nep-mic and nep-pol
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