How to Select Fiscal Rules: A Primer

IMF How To Notes, March 15, 2018

Source details

Provides guidance on how to select fiscal rules across advanced, emerging market, and developing economies.
Emphasizes principles and methods that are intuitive, easy to implement, and leave room for policy judgment.
Methods draw on past academic and IMF work, including analytic and policy papers, technical assistance missions, and training.

The note is structured into four main sections:
- General principles regarding the design of fiscal rules.
- Review of the most common rules with descriptions of pros and cons.
- Presentation of analytical tools used to select fiscal rules (files and manuals accompany the note and are available from the authors upon request).
- Considerations on rules in developing countries, with a specific focus on commodity exporters.
An overview of the theoretical literature is provided in the Appendix.

Selection of fiscal rules should be tailored to country circumstances across the full range of economies.
The guidance combines intuitive methods with room for policy judgment rather than rigid prescriptions.
Analytical tools accompanying the note are intended to operationalize the selection methods (available from the authors upon request).

This note is one of two guidance notes on the design of fiscal rules; the other note focuses on rule calibration.
The exercises of selection and calibration are linked: if a fiscal framework must be built from scratch, rules need to be selected and calibrated at the same time.

Fiscal Policy: How to Select Fiscal Rules, A Primer; How-to Note No. 9; March 2018
- Fiscal Policy: How to Select Fiscal Rules, A Primer; How-to Note No. 9; March 2018 (Markdown version)
- Fiscal Policy: How to Select Fiscal Rules, A Primer; How-to Note No. 9; March 2018 (PDF)