Preconditions for a Successful Introduction of Structural Fiscal Balance-based Rules in Latin America and the Caribbean: A Framework Paper

This paper explores the design of sound fiscal rules and their effective implementation and enforcement in the light of the existing literature and of available empirical evidence. It focuses in particular on the potential advantages and requirements for the effective operation of fiscal rules based on structural budget balances (i.e. balances adjusted for the output cycle and other relevant exogenous influences, such as commodity price developments). It also discusses the potential use of structural budget balances as indicators of the fiscal policy stance, rather than as numerical policy targets.