The Effectiveness of National Fiscal Rules in the Asia-Pacific Countries
This study utilizes the International Monetary Fund (IMF) Fiscal Rules Dataset focusing on four specific fiscal rules such as expenditure rule, revenue rule, budget balance rule, and debt rule and five main characteristics of each fiscal rule those are monitoring, enforcement, coverage, legal basis, and escape clause to construct the Fiscal Rule Index for nine countries in the Asia-Pacific region from 1996 to 2015. After constructing the fiscal rule index for each country, we utilize the Panel Generalized Method of Moments (Panel GMM) by using the constructed fiscal rule index to examine the effectiveness of fiscal rules in reducing procyclicality. Empirical results show that national fiscal rules have a significantly negative impact on procyclicality of government expenditure. Additionally, stricter fiscal rules combined with high government effectiveness are effective in reducing procyclicality of government expenditure. Results of this study indicate that for nine Asia-Pacific countries, policymakers’ use of fiscal rules and government effectiveness to reducing procyclicality of fiscal policy are effective.
Digital Object Identifier (DOI): doi.org/10.5281/zenodo.1477944Procedia APA BibTeX Chicago EndNote Harvard JSON MLA RIS XML ISO 690 PDF Downloads 278
 Kumar, M., E. Baldacci, A. Schaechter, A. C. Caceres, D. Kim, X. Debrun, J. Escolano, J. Jonas, P. Karam, I. Yakadina, and R. Zymek, “Fiscal rules-anchoring expectations for sustainable public finances,” IMF Staff Paper, No. 121609, 2009.
 Schaechter, A., T. Kinda, N. Budina, and A.Weber,“Fiscal rules in response to the crisis- toward the “next-generation” rules: a new dataset,” IMF Working Paper, No. WP/12/187, pp. 263-292, 2012.
 Kopits, G. and S. Symansky, “Fiscal policy rules,” IMF Occasional Paper, no. 162, pp. 1-36, 1998.
 International Monetary Fund. “Fiscal monitor: balancing fiscal policy risks,” World Economic and Financial Surveys, 2012.
 Bova E., N.Carcenac, and M. Guerguil. Fiscal Rules and the Procyclicality of Fiscal Policy in the Developing World. IMF-Fiscal Affairs Department, WP/14/122, Washington, USA, 2014.
 Inman, R. P., “Do balanced budget rules work? US experience and possible lessons for the EMU,” NBER Working Paper, No. 5838, 1998.
 Ayuso-i-Casals, J., D. Hernandez, L. Moulin, and A. Turrini, “Beyond the SGP. Features and effects of EU national-level fiscal rules,” European Economy, vol. 275, pp. 191–242, 2007.
 Debrun X., Moulin L., Turrini A., Ayuso-i-Casals J., Kumar M. S., “Tied to the mast? National fiscal rules in the European Union,” Economic Policy, vol. 23, no. 54, pp. 299-362, 2008.
 Debrun, X. and M. S. Kumar, “The discipline-enhancing role of fiscal institutions: Theory and empirical evidence,” IMF Working Paper, No. 07/171, 2007.
 Alt, J. and R. Lowry, “Divided government, fiscal institutions, and budget deficits: Evidence from the states,” American Political Science Review, vol. 88, no. 4, pp. 811-828. (1994).
 Poterba, J., “State responses to fiscal crises: The effects of budgetary institutions and politics,” Journal of Political Economy, vol.102, pp. 799-821, 1994.
 Bayoumi, T. and B. Eichengreen, “Restraining yourself: The implications of fiscal rules for economic stabilization,” IMF Staff Paper, vol. 42 (1), pp. 32-48, 1995.
 Alesina, A. and T. Bayoumi, “The costs and benefits of fiscal rules: Evidence from US States,” NBER Working Paper, No. 5614, 1996.
 Debrun, X. and M. S. Kumar, “Fiscal rules, fiscal councils and all that: Commitment devices, signaling tools or smokescreens?” Fiscal Policy: Current Issues and Challenges, pp. 479-512, 2007.
 Krogstrup, S. and S. Walti, “Do fiscal rules cause budgetary outcomes?” Public Choice, vol. 36, pp. 123-138, 2008.
 Marneffe, W., B. van Aarle, W. van der Wielen and L. Vereeck, “The impact of fiscal rules on public finances in the Euro area,” CESifo DICE Report, pp. 18-25, 2011.
 Debrun, X., “Tying hands is not commitment: Can fiscal rules and institutions really enhance fiscal discipline?” Bruegel Working Paper, No. 2007/01, 2007.
 Larch, M. and A. Turrini, “Received wisdom and beyond: lessons from fiscal consolidation in the EU,” European Economy, Economic Paper No. 320, 2008.
 European Commission, “Public finance report in EMU-2007, Part IV: Lesson from successful fiscal consolidations,” European Economy, No. 3/2007, 2007.
 International Monetary Fund, “United Kingdom: Selected issues paper,” Country IMF Report, 10/337, pp. 50-73, 2010.
 Gavin, M. and R. Perotti (1997). “Fiscal policy in Latin America,” In M. Gertler and K. Rogoff (Eds.), NBER Macroeconomics Annual, Cambridge, MA: MIT Press.
 Gali, J. and R.Perotti, “Fiscal policy and monetary integration in Europe,” NBER Working Paper, No. 9773, 2003.
 Melitz, J., “Some Cross-Country Evidence about Fiscal Policy Behaviour and Consequences for EMU,” European Economy, no. 2, pp. 3-21, 2000.
 Kaminsky, Graciela, Reinhart, Carmen, Vegh, Carlos A, “When it rains it pours: Procyclical capital flows and macroeconomic policies,” In M. Gertler and K. Rogoff (Eds.), NBER Macroeconomics Annual, Cambridge, MA: MIT Press, 2004.
 Talvi, E. and C. Vegh,“Tax Base Variability and Procyclical Fiscal Policy,” Journal of Development Economics, vol. 78, pp. 156-190, 2005.
 Manasse, P., “Deficit limits, budget rules and fiscal policy,” IMF Working Paper, No. 05/230, 2005.
 Ilzetzki, E.and C. Vegh, “Procyclical fiscal policies in developing countries: Truth or fiction,” NBER Working Paper, No. 14191, 2008.
 Bova, E., N. Carcenac, and M. Guerguil. Fiscal Rules and the Procyclicality of Fiscal Policy in the Developing World. IMF-Fiscal Affairs Department, WP/14/122, Washington, USA, 2014.
 European Commission, “Public Finance Report in EMU-2010,” European Economy, No. 4/2010, 2010.
 Nerlich, C. and W. H. Reuter, “The Design of National Fiscal Frameworks and their Budgetary Impact,” ECB Working Series, No. 1588, 2013.
 Bergman, M., M. Hutchison, and S. Jensen, “Economic stabilization in the post-crisis world: Are fiscal rules the answer?” Journal of International Money and Finance, vol. 52, pp. 82-101, 2015.
 Sacchi, A. and S. Salotti, “The impact of national fiscal rules on the stabilization function of fiscal policy” European Journal of Political Economy, vol. 37, pp. 1-20, 2015.
 International Monetary Fund. Fiscal Rules Dataset 1985-2015, 2017. Retrieved from: http://www.imf.org/external/datamapper/FiscalRules/map/map.html