Fiscal councils and economic volatility

0429460 - NHU-C 2015 RIV CZ eng J - Journal Article
Geršl, A. - Jašová, M. - Zápal, Jan
Fiscal councils and economic volatility.
Finance a úvěr-Czech Journal of Economics and Finance. Roč. 64, č. 3 (2014), s. 190-212. ISSN 0015-1920. E-ISSN 0015-1920
Grant - others:UK(CZ) UNCE 204005/2012
Institutional support: PRVOUK-P23
Keywords : dynamic inconsistency * fiscal and monetary policy interaction * independent fiscal council
Subject RIV: AH - Economics
Impact factor: 0.420, year: 2014
http://journal.fsv.cuni.cz/storage/1298_jasova.pdf

We evaluate proposals for an independent fiscal authority put forward as a solution to excessive public spending. Our main conclusion is that shifting the responsibility to set broad measures of fiscal policy from the hands of the government to an independent fiscal council is not necessarily welfare improving. We show that the change is welfare improving if the ability of policymakers to assess the state of the economy does not change. How-ever, if this institutional change involves a considerable decrease of capacity of the new agency to recognize economic shocks, citizens’ welfare can decrease as a result. This is especially significant in times of increased economic volatility such as during the recent global financial crisis. Faced with the ambiguous theoretical result, we try to gain deeper insight by calibrating our simple model.
Permanent Link: http://hdl.handle.net/11104/0234600