Democratic Accountability, Deficit Bias, and Independent Fiscal Agencies

Author/Editor:

Xavier Debrun

Publication Date:

July 1, 2011

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

Despite growing interest among policymakers, there is no theory of independent fiscal institutions. The emerging literature on "fiscal councils" typically makes informal parallels with the theory of central bank independence, but a very simple formal example shows that such a shortcut is flawed. The paper then illustrates key features of a model of independent fiscal agencies, and in particular the need (1) to incorporate the intrinsically political nature of fiscal policy - which precludes credible delegation of instruments to unelected decisionmakers - and (2) to focus on characterizing "commitment technologies" likely to credibly increase fiscal discipline.

Series:

Working Paper No. 2011/173

Subject:

Budget planning and preparation Central bank autonomy Central banks Fiscal policy Inflation Prices Public debt Public financial management (PFM)

English

Publication Date:

July 1, 2011

ISBN/ISSN:

9781462313327/1018-5941

Stock No:

WPIEA2011173

Pages:

15

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