IMF How To Notes

How to Design Subnational Fiscal Rules: A Primer

By Luc Eyraud, Andrew Hodge, John Ralyea, Julien Reynaud

February 25, 2020

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Luc Eyraud, Andrew Hodge, John Ralyea, and Julien Reynaud. How to Design Subnational Fiscal Rules: A Primer, (USA: International Monetary Fund, 2020) accessed December 2, 2024

Summary

This note discusses how to design subnational fiscal rules, including how to select them and calibrate them. It expands on the guidance provided at the national level on rule selection and calibration in IMF (2018a) and IMF (2018b). Thinking on subnational fiscal rules is still evolving, including their effectiveness (for example, Heinemann, Moessinger, and Yeter 2018; Kotia and Lledó 2016; Foremny 2014), and this note only provides a first analysis based on international experiences and the technical assistance provided by the IMF. Main findings are summarized in Box 1. The note is divided into five sections. The first section defines fiscal rules. The second section discusses the rationale for subnational rules. The third section provides some guidance on how to select the appropriate rule(s) and whether they should differ across individual jurisdictions. The fourth section explores the issue of flexibility by looking at how rules should adjust to shocks. Finally, the last section focuses on the “calibration” of the rules.

Subject: Budget planning and preparation, Current spending, Debt service, Expenditure, External debt, Fiscal policy, Fiscal rules, Public financial management (PFM)

Keywords: Allowed, Budget balance rule, Budget planning and preparation, CAB rule, Central government, Country, Current spending, Debt rule, Debt service, Debt service rule, Design Subnational fiscal rule, Expenditure rule, FADHTN, Fiscal rules, Fiscal RulesHow, Global, Government, Government control, Government entity, Government level, Government policy, Government rule, Government unit, Governments in OECD country, HTN, National government, Output gap, RulesHow to design Subnational fiscal rule, Subnational fiscal RulesHow

Publication Details

  • Pages:

    29

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    How-To Note No. 2020/001

  • Stock No:

    HTNEA2020001

  • ISBN:

    9781513527031

  • ISSN:

    2522-7912