Fiscal Rules in Response to the Crisis: Toward the "Next-Generation" Rules: A New Dataset

IMF Working Papers, July 1, 2012

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Strengthening fiscal frameworks, in particular fiscal rules, has emerged as a key response to the fiscal legacy of the crisis.
The paper takes stock of fiscal rules in use around the world, compiles a dataset, and presents details about the rules’ key design elements, particularly in support of enforcement.
Information from the dataset is summarized in a set of fiscal rules indices.

Coverage: national and supranational fiscal rules.
Countries covered: 81 countries.
Time span: 1985 to end-March 2012.
Dataset focus: key design elements of fiscal rules, with attention to enforcement features.

Three key findings emerge:
- (i) many new fiscal rules have been adopted and existing ones strengthened in response to the crisis;
- (ii) the number of fiscal rules and the comprehensiveness of the design features in emerging economies has caught up to those in advanced economies;
- (iii) the "next-generation" fiscal rules are increasingly complex as they combine the objectives of sustainability and with the need for flexibility in response to shocks, thereby creating new challenges for implementation, communication, and monitoring.

"Next-generation" fiscal rules aim to balance sustainability objectives with flexibility to respond to shocks.
This dual objective increases complexity and creates new challenges in:
- implementation
- communication
- monitoring
The dataset and indices provide a basis for assessing rule design elements that support enforcement.