Abstract

The search for more comprehensive institutional arrangements to improve fiscal policy outcomes intensified during the last decade. Analogous to the monetary policy debate, while discussions initially centered on the general issue of rules versus discretion, more recently they have turned into a search for broader institutional arrangements that would help ensure the desired fiscal policy outcomes. Recognizing the limited scope for improvement that stand-alone fiscal rules can provide, and the frequent lack of immediate results from enhanced transparency alone, fiscal responsibility laws (FRLs) have been enacted in many countries as permanent institutional devices aiming to promote fiscal discipline in a credible, predictable, and transparent manner. New Zealand was at the forefront of these reforms, adopting an FRL in 1994. More recently, FRLs have been implemented in several countries in Latin America, Europe, and Asia.