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How to Design Subnational Fiscal Rules: A Primer
Author:
Luc Eyraud
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Andrew Hodge
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Mr. John Ralyea
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Julien Reynaud
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Series:
IMF How To Notes
Volume/Issue:
Volume 2020: Issue 001
Language:
English
Publication Date:
25 Feb 2020
DOI:
https://doi.org/10.5089/9781513527031.061
ISBN:
9781513527031
ISSN:
2522-7912
Pages:
29
Keywords:
FADHTN; HTN; national government; government level; output gap; central government; expenditure rule; government; country; Allowed; CAB rule; governments in OECD country; government control; government unit; government policy; debt rule; debt service rule; government entity; budget balance rule; government rule; Global; Fiscal rules; Debt service; Current spending; Budget planning and preparation; Subnational fiscal RulesHow; design Subnational fiscal rule; fiscal RulesHow; RulesHow to design Subnational fiscal rule
Legal-disclaimer:
Fiscal Affairs Department (FAD) How to Notes offer practical advice from IMF staff members to policymakers on important fiscal issues. The views expressed in FAD How to Notes are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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This note discusses how to design subnational fiscal rules, including how to select them and calibrate them. It expands on the guidance provided at the national level on rule selection and calibration in IMF (2018a) and IMF (2018b). Thinking on subnational fiscal rules is still evolving, including their effectiveness (for example, Heinemann, Moessinger, and Yeter 2018; Kotia and Lledó 2016; Foremny 2014), and this note only provides a first analysis based on international experiences and the technical assistance provided by the IMF. Main findings are summarized in Box 1. The note is divided into five sections. The first section defines fiscal rules. The second section discusses the rationale for subnational rules. The third section provides some guidance on how to select the appropriate rule(s) and whether they should differ across individual jurisdictions. The fourth section explores the issue of flexibility by looking at how rules should adjust to shocks. Finally, the last section focuses on the “calibration” of the rules.
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Cover IMF How To Notes
IMF How To Notes
ISSN:
2522-7912
Publisher:
International Monetary Fund