On the importance of statistical governance quality and accurate targets for fiscal rules’ performance

Kea Baret

Working Papers of BETA from Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg

Abstract: Following last economic crises, a debate challenged fiscal rules arguing alternatively between discard or reform them. Economic literature developed that effective fiscal rules must be simple, clear and credible. Although difficult to reconcile, these conditions can be approximated if statistics provide accurate measures of indicators targeted by fiscal rules. Focusing on the Golden rule (GR) of public finance, the paper demonstrates the importance of statistical governance quality and accurate targets for fiscal rules’ performance. Using United Kingdom data, its shows that the GR is neither simple nor clear since its target measurement is sensitive to national accounts methodologies. We also raise concerns on GR credibility as its target forecast is accompanied by uncertainty, as depicted in a stochastic VAR analysis. Main conclusions show that the performance of GR is sensitive to the quality of its target measurement, and fiscal rules must rely on transparent statistics and accurate targeted indicators.

Keywords: Fiscal Rules; Golden Rule; Public Sector; Net investment; National Accounts; VAR analysis. (search for similar items in EconPapers)
JEL-codes: C1 E22 H60 H83 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:ulp:sbbeta:2023-40

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