Limit search to available items
Book Cover
E-book
Author Beetsma, Roel M. W. J., author.

Title The Political Economy of Fiscal Transparency and Independent Fiscal Councils
Published [Washington, D.C.] : International Monetary Fund, [2017]
©2017

Copies

Description 1 online resource (49 pages)
Series IMF Working Paper ; WP/17/197
IMF working paper ; WP/17/195.
Contents Cover; Contents; I. Introduction; II. Independent Fiscal Councils on the Rise; III. The Model; IV. First-Best Benchmark: The Social Planner Solution; V. Debt Choice in the Political Game; A. Belief Formation and Updating; B. Election Outcome; C. Equilibrium Public Debt; VI. More Transparency? The Effect of a Fiscal Council on Equilibrium Debt; VII. Who Wants a Fiscal Council? The Incumbentâ#x80;#x99;s Case; VIII. Who Wants a Fiscal Council? The Votersâ#x80;#x99; Case; IX. Other Manifestations of Fiscal Transparency; X. Politics and the Emergence of IFCs: Are Stylized Facts Consistent with Theory?
XI. ConclusionReferences; Table; 1: Panel Averages of Variables Capturing Polarization Elements; Figures; 1. Number of Independent Fiscal Councils in the World; 2. The Remit of Fiscal Councils; 3. Channels of Influence on the Budget Process; 4. Guarantees of Independence; 5: Debt, Transparency and Electoral Advantage; 6. Introducing an IFC: Effect on Incumbentâ#x80;#x99;s Utility; 7. Introducing an IFC: Effects on Social Welfare vs. Incumbentâ#x80;#x99;s Utility; Appendix; Appendix A: Additional proofs
Summary The global surge in independent fiscal councils (IFCs) raises three related questions: How can IFCs improve the conduct of fiscal policy? Are they simultaneously desirable for voters and elected policymakers? And are they resilient to changes in political conditions? We build a model in which voters cannot observe the true competence of elected policymakers. IFCs' role is to mitigate this imperfection. Equilibrium public debt is excessive because policymakers are 'partisan' and 'opportunistic.' If voters only care about policymakers' competence, both the incumbent and the voters would be better off with an IFC as the debt bias would shrink. However, when other considerations eclipse competence and give the incumbent a strong electoral advantage or disadvantage, setting up an IFC may be counterproductive as the debt bias would increase. If the incumbent holds a moderate electoral advantage or disadvantage, voters would prefer an IFC, but an incumbent with a large advantage may prefer not to have an IFC. The main policy implications are that (i) establishing an IFC can only lower the debt bias if voters care sufficiently about policymakers' competence; (ii) not all political environments are conducive to the emergence of IFCs; and (iii) IFCs are consequently vulnerable to shifts in political conditions
Notes Print version record
Subject All Countries.
General.
Fiscal Transparency.
Fiscal Policy.
Form Electronic book
Author Debrun, Xavier, author
Sloof, Randolph, author
ISBN 9781484318423
1484318420
1484315553
9781484315552