The Role of Fiscal Rules in Ensuring Fiscal Discipline

Abstract

The necessity to devote serious attention to the issue of fiscal discipline in many countries of the world, raised the question for implementation of adequate tools in order to control the irresponsible fiscal policy through emphasizing the importance of fiscal rules and fiscal councils. The purpose of this paper is to analyze the advantages and disadvantages of these fiscal rules, as well what the states should undertake to improve the prudence of fiscal policy, credibility of state institutions and reduce the level of indebtedness. This paper enlightens the problems that face many of the countries which implement some kind of fiscal rule especially in bad economic conditions. Also, the authors in this paper elaborate several cases of countries who implement different types of national, subnational or supranational fiscal rules and determines the effectiveness or restrictions of specific kind of rules.