Toward a Robust Fiscal Framework for Iceland: Motivation and Practical Suggestions

 
Author/Editor: Annett, Anthony
 
Publication Date: October 01, 2007
 
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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: Expenditure in Iceland, especially related to the government wage bill, has tended to move in a procyclical manner, related to the fragmentation of political decision making. Iceland's elevated macroeconomic volatility reinforces these tendencies, as large booms unleash greater fiscal pressures as well as procyclical revenue elasticities that magnify these underlying strains. To improve its fiscal framework, Iceland could look to the experience of countries like Belgium and the Netherlands. In particular, it could adopt binding nominal expenditure rules, independent forecasts, and use representative committees to lay out medium-term targets across different levels of government.
 
Series: Working Paper No. 07/235
Subject(s): Fiscal policy | Iceland | Government expenditures | Political economy | Finland

Author's Keyword(s): Fiscal policy | procyclicality | political economy
 
English
Publication Date: October 01, 2007
Format: Paper
Stock No: WPIEA2007235 Pages: 25
Price:
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