New Fiscal Rule : Should Israel go Swiss?
ISBN: 9781451914023
Platform/Publisher: Ebook Central / International Monetary Fund
Digital rights: Users: Unlimited; Printing: Limited; Download: 7 Days at a Time
Subjects: Economics; Business/ Management;

We propose a fiscal rule that fulfills a specific debt reduction objective while maintaining significant fiscal flexibility-two overarching concerns in Israel. Not unlike the Swiss "debt brake," the rule incorporates an error-correction mechanism (ECM) through which departure from the debt objective affects binding medium-run expenditure ceilings. Two variants of our ECM rule are shown to be superior to a comparable deficit rule in terms of attaining the debt objective and allowing for fiscal stabilization while supporting medium-term expenditure planning. Given its relative sophistication, a proper implementation of the ECM rule requires supportive fiscal institutions, including independent input and assessment.


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