Hemming R. and M. Kell, (2001), “Promoting Fiscal Responsibility. Transparency, Rules and Independent Fiscal Authorities,” Fiscal Affairs Department, IMF, May.
Kennedy, S. J. Roberts and F. Delorme, (2001), “The Role of Fiscal Rules in Determining Fiscal Performance,” Department of Finance, Canada, January.
Berndsen R., (2001), “Postwar Fiscal Rules in The Netherlands: What Can We Learn?,” Banca d’ltalia, Third Workshop on Public Finance, Perugia, February.
Reininga T., (2001), “Coalition governments and Fiscal Policy in The Netherlands,” Banca d’ltalia, Third Workshop on Public Finance, Perugia, February.
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This chapter was prepared by Enrica Detragiache and Gabriel Di Bella.
The Australian population is relatively young and therefore population aging is not a important concern compared to other OECD countries.
The financial risks identified by the Charter include those arising from excessive net debt, commercial risks arising from ownership of public trading enterprises and public financial enterprises, risks arising from erosion of the tax base and from the management of assets and liabilities.
The fiscal year runs from July 1 to June 30.
The FSCA in its article 10 established that by 1994 Parliament should consider extending the law. As legislation was not deemed necessary to further control spending, the act was not extended beyond 1995.
For the 2000, budget prudence has been set at $1 billion in 2000–01 and $2 billion in 2001-02, as in the 1999 Economic and Fiscal Update.
Short-term economic stabilization is not a specific objective, although the government has established that tax reductions have to be implemented taking into consideration the position of the economy in the business cycle.
In the context of this discussion potential and trend GDP are considered equivalent concepts.
In introducing this budgetary policy, the minister of finance followed the advice of the “Study Group of Budgetary Margin,” which is composed by the highest-rank civil servants of the financial and economic ministries, an executive director of the Central Bank and the director of the Netherlands Bureau For Economic Policy Analysis. This group also devised the fiscal policy followed by The Netherlands during the 1960s and 1970s.
Central government spending includes interest on public debt and excludes local government spending and a fund for infrastructure investment. In addition, it is net of non-tax and non-premium revenues.
This is known in The Netherlands as the “Zalm rule,” after the Finance Minister of the two Kok governments.
However, according to the Rome Agreement of 1992 Sweden is an observer member of the European Union and does not participate in EMU.
The public sector in Sweden includes the central, local, and regional governments and fiscal agencies.
The new budgetary process gives the Ministry of Finance more powers in drawing up the budget compared to the earlier process.
There is an indicative ceiling for general government expenditures, which includes estimated local government expenditure. It is only indicative because local governments have the right to decide on their own levels of expenditure. However, local government expenditure is primarily affected by central government grants and tax revenues, so the indicative ceiling is actually quite binding. Additionally, as of 2000, the Parliament decided that municipalities and county councils should present budgets with ex-ante surpluses.
Budget “balance” was defined as at most a deficit of 2 percent of total revenues.
The procedure to compute the output gap ensures that this objective is met. In this regard, the authorities have proposed the use of the Hodrick-Prescott filter, but this is not legislated and the government is open to using other methods.
In the formula for Ft, τ denotes the first period of application of the fiscal rule and t denotes the current period.
The fiscal rule is considered to be complied with if modified expenditures exceed the ceiling by at most 0.5 percent of the ceiling.
In order to avoid loopholes, the definition of public investment follows that included in the System of National Accounts.
As examples, the current authorities have stated that a sustainable level of net public debt to GDP ratio in 40 percent.
The rules of operation are related with government practice and are not specified in the CFS. For more on this, see below in the section.
It should be noted that the supporting expenditure framework is not established in the CFS.
The discussion that follows refers to the federal government only.
According to Peach (2001), the first law that incorporates a provision that can be interpreted as a fiscal rule is from 1917. This law, the “Liberty Bond Act,” established a statutory limit on the gross indebtedness of the Federal government. This law intended to provide a simplifying procedure to the issuing of bonds, since before the law, every individual bond issue had to be approved by the Congress. In the 1980s and 1990s, the need to raise the federal debt ceiling motivated the enactment of deficit reduction legislation. Additionally, the “Congressional Budget and Impoundment Control Act” of 1974, established the current congressional budget process, with the creation of the House and Senate Budget Committees and the Congressional Budget Office (CBO).
In 1996, Congress approved the “Line Item Veto Act,” which granted the President the authority to cancel selected categories of spending and tax provisions over the period 1997-2004. However this act was declared unconstitutional by the Supreme Court and therefore abolished.
It additionally placed the sequester “trigger” in the hands of the Office of Management and Budget (OMB) Director.