IMF Book Launch and Seminar: Fiscal Politics

March 29, 2017

Politics influence economic outcomes through various channels, including structural reforms and monetary and fiscal policies. The proximity to elections can affect the mix of government’s spending plans. Political divisions could lead to larger fiscal deficits and public debt. Political ideology can have an influence on the design of tax and expenditure policies. With politics affecting fiscal outcomes, the issue that arises is whether fiscal rules and institutions can make a difference. This is the focus of a new book by International Monetary Fund staff, "Fiscal Politics."

On March 29, the Brookings Global Economy and Development Program will co-host Vitor Gaspar, director of the IMF Fiscal Affairs Department, as well as his deputy and co-editor Sanjeev Gupta, for a short presentation of this new book. Following opening remarks by Brookings Vice President Kemal Derviş and a brief presentation of key findings, a panel of experts will reflect on the book’s conclusions.

This event is open to the public, and those wishing to attend are asked to RSVP by calling the Brookings Office of Communications at 202.797.6105 or visiting www.brookings.edu/events/.

Speakers:

Opening Remarks by: Kemal Derviş, Vice President and Director - Global Economy and Development, Brookings Institution

Presentation by: Sanjeev Gupta, Deputy Director, Fiscal Affairs Department, International Monetary Fund

Panelists:

Moderator: Kemal Derviş, Vice President and Director - Global Economy and Development

Carol Graham, Leo Pasvolsky Senior Fellow - Global Economy and Development, Brookings Global – CERES Economic and Social Policy in Latin America Initiative

Sebnem Kalemli-Ozcan, Neil Moskowitz Endowed Professor of Economics, University of Maryland; Research Associate, NBER

Vitor Gaspar, Director, Fiscal Affairs Department, International Monetary Fund

Randall Henning, Professor, School of International Service, American University

About the Editors:

Vitor Gaspar is the Director of the IMF Fiscal Affairs Department. Prior to joining the Fund, he served as Minister of State and Finance of Portugal, and held various positions at the Bank of Portugal, the European Central Bank and the European Commission.

Sanjeev Gupta is the Deputy Director of the IMF’s Fiscal Affairs Department. Prior to joining the Fund, he was a fellow of the Kiel Institute of World Economics; Professor in the Administrative Staff College of India, and Secretary of the Federation of Indian Chambers of Commerce and Industry.

Carlos Mulas-Granados is a Senior Economist in the IMF’s Fiscal Affairs Department. Prior to joining the Fund, he was a Professor of Applied Economics at Complutense University, and served as the Deputy Director of the Spanish Prime Minister’s Economic Office.

Advance Comments on Fiscal Politics:

The essays in Fiscal Politics are gold mines of description and explanation of the sources of tension between optimal and equilibrium fiscal policies. The book presents a fascinating array of evidence about the purposes served by alternative rules, when they have worked, when they have broken down, and how they can be improved.

—Thomas J. Sargent
Professor, New York University, and Nobel Laureate in Economics

It is now widely accepted that understanding fiscal policy requires understanding economics and politics. This valuable volume is rooted in political economy and covers a range of first-order issues which will be of interest to both researchers and policymakers.

—Timothy J. Besley
Professor, London School of Economics

You can’t understand fiscal policy if you don’t consider the politics behind it. This book will greatly help you to navigate this complex territory. A splendid and broad-ranging contribution.

—Alberto Alesina
Professor, Harvard University

Fiscal Politicskeeps with a long IMF tradition to offer lucid, commonsensical empirical analyses of policymaking, but breaks with a long IMF tradition to stay clear of politics. Instead, the authors in this collection of essays on fiscal policy pay close attention to the constraints and motives embedded in political institutions. They uncover new answers to a range of interesting questions on how fiscal policy reflects domestic political drivers—like elections, party fragmentation, and investments in state building— as well as interactions with domestic and supranational institutions—like fiscal rules and watchdogs, the EU, and the IMF itself.

—Torsten Persson
Professor, Swedish Research Council and University of Stockholm

The current President of the European Commission, Jean-Claude Juncker, famously remarked, "We all know what are the policies which we should follow, but we do not know how to do them and then be re-elected." An obvious application of this statement regards fiscally prudent policies. An idea vastly held as obvious is that voters always punish incumbents who raise taxes or cut spending to reduce deficits. The first part of this book provides a new, thorough, and welcome analysis of the issues related to fiscal politics. Parts II and II are an instruction manual on how to design institutions that help control a country’s debt at the national and supranational levels. Governments and legislatures throughout the world will find this manual particularly valuable. This is a book that should be on the shelf of any policymaker with an interest in fiscal policy and on the reading list of any macro course that aims to address relevant issues

—Francesco Giavazzi
Professor, Bocconi University