Authors: Christos Chrysanthakopoulos, Athanasios Tagkalakis

Title: The effects of fiscal institutions on the conduct of fiscal policy

Abstract

Using a panel of 40 advanced economies over the period 1990-2020, we investigate the effect of fiscal institutions and their individual characteristics on fiscal policy. We find evidence that expenditure, debt and budget balance rules can reduce the size of procyclicality, in particular, in countries with low government effectiveness. Fiscal rules can mitigate procyclicality if their implementation is overseen by independent fiscal councils. A fiscal rule with strict enforcement, a well specified escape clause and multi-year expenditure ceilings curbs fiscal policy procyclicality in good times.