Fiscal Rules and Fiscal Councils Recent Trends and Performance during the COVID-19 Pandemic by Hamid R. Davoodi, Paul Elger, Alexandra Fotiou, Daniel Garcia-Macia, Xuehui Han, Andresa Lagerborg, W. Raphael Lam, and Paulo Medas published by IMF (1/2022).
Adoption offiscal rules and fiscal councils continued to increase globally over the lastdecades based on two new global datasets. During the pandemic, fiscal frameworks were putto test. The widespread use of escape clauses was one of the novelties in this crisis,which helped provide policy room to respond to the health crisis.But the unprecedented fiscal actions have led to large and widespread deviations from deficit and debt limits.The evidence shows thatfiscal rules, in general, have been flexible during crises but have not prevented a large and persistent buildup of debt over time. Experience shows thatdeviations from debtlimits have been very difficult to reverse.The paper also presents evidence on the benefits of a good track record in abiding by the rules. All these highlight the difficultpolicy choices ahead and need to further improve rules-based fiscal frameworks.
