Euro area entry calls for more fiscal flexibility to absorb cyclical shocks that cannot be dealt with by the common monetary policy. At the same time fiscal consolidation must not be put at risk, especially given rising ageing related costs. The current fiscal framework could be improved by...

This paper discusses the current state of fiscal relations between the federal, state and local governments in the United States and suggests directions for improvement. The significant degree of fiscal autonomy of the states and, to a lesser extent, of local governments has had several...

Switzerland is a highly decentralised country with large spending and revenue-raising powers devolved to cantons and municipalities. The federal system, in combination with an extensive use of direct democracy, has contributed to keep public spending at a relatively low level in international...

In about two decades, Spain was transformed from one of the most centralised countries to one of the most decentralised. Spending functions were devolved rapidly. The regions have exercised their discretionary powers quite extensively and innovative policies have been implemented. But devolution...

Enhanced autonomy of sub-national governments has spurred innovative management. Spending assignments across levels of government, however, often overlap and/or are not yet fully understood by most citizens. Sub-national governments’ accountability is further reduced by the heavy reliance on...

This paper reviews recent trends in fiscal performance in Brazil, estimates fiscal reaction functions for the consolidated public sector and different levels of government, and tests for the sustainability of the public debt dynamics. The empirical analysis, based on monthly data for the period...

Fiscal consolidation is required in most OECD countries. This is especially so in view of mediumand long-term spending pressures on public finances, related, inter alia, to ageing. Based on a dataset covering a large number of OECD fiscal consolidation episodes starting in the late 1970s, the...

This paper reviews the arguments in favor of excluding investment from fiscal policy constraints (the adoption of a “golden rule”). The paper starts by reviewing the goals and motivations of fiscal policy rules. From this analysis, it is clear that answering the question of whether...

Tax receipts surged between 2005 and 2007 in many OECD countries, resulting in significant improvements in headline fiscal positions. As a consequence, pressures for tax cuts and for public spending increases have emerged. In the past, responding to such demands has permanently weakened budget...

Accounting conventions usually leave some room for judgment, which governments may be tempted to take advantage of, especially when fiscal rules bite or threaten to do so. The European experience over the past decade -- documented here in great detail -- illustrates that fiscal gimmicks come in...