Restoring Public Debt Sustainability: The Role of Independent Fiscal Institutions represents the first comprehensive survey of a new generation of independent fiscal institutions, established to promote transparency in public finances through real-time monitoring of the soundness of budgetary policymaking. The chapters, authored by heads of the institutions, as well as distinguished policy analysts and academics, explore the rationale and experience of these fiscal watchdogs. Consequently, useful lessons and implications are drawn for the design and practical operation of such institutions. The timeliness of the volume is underscored by the potential role of fiscal watchdogs in containing the public debt crisis that has engulfed a number of countries. Indeed, the recent proliferation of these institutions has been in response to the need for enhancing policy credibility of governments in financial markets and, more generally, for strengthening the quality of economic governance.
The first part of the book deals with key analytical and institutional issues: the political environment, the scope and limits of these institutions, the delegation of monetary policymaking to an independent body, and the implications of rising public indebtedness. The second part contains case studies of institutions that, for the most part, were born as a result of domestic political developments. The third part presents the experience of institutions whose origins can be traced directly or indirectly to an earlier or a recent financial crisis. The chapters are written from a multidisciplinary - economic, financial, political, legal - perspective, intended for academics, researchers, and practitioners alike.
George Kopits, Senior Scholar, Woodrow Wilson Center
George Kopits is a senior scholar at the Woodrow Wilson International Center for Scholars, and a member of the Portuguese Public Finance Council and of Peru's Commission on Reform of the Macro-Fiscal Framework. Recently, he chaired the OECD reference group on independent fiscal institutions. In the past, he served as the first chair of the Fiscal Council in Hungary and as a member of the Monetary Council, National Bank of Hungary. Previous positions included assistant director at the International Monetary Fund and financial economist at the U.S. Treasury Department. He has given technical advice to governments in Europe, Latin America, and Asia. He has held a number of visiting academic appointments (at Bocconi, Budapest, Cape Town, Johns Hopkins, Siena, and Vienna universities) and has published extensively on public policy issues. Currently, he is on the adjunct faculty of the Central European University.
Table of Contents
Preface, Sir Alan Budd
1. Introduction and Overview, George Kopits
Part I Analytical and Institutional Issues
2. Politics and Independent Analysis, Alice M. Rivlin
3. Scope and Limits of Independent Fiscal Institutions, Jurgen von Hagen
4. Comparing the Delegation of Monetary and Fiscal Policy, Simon Wren-Lewis
5. Independent Fiscal Institutions in the Face of Rising Public Debt, Julia I. Bertelsmann
Part II Experience of Internally-Driven Institutions
6. United States: Pioneer in Fiscal Surveillance, C. Eugene Steuerle and Stephanie Rennane
7. Netherlands: Fostering Consensus on Fiscal Policy, Frits Bos and Coen Teulings
8. Belgium: Promoting Fiscal Discipline in a Federal System, Luc Coene and Geert Langenus
9. Canada: Oversight with Qualified Independence, Kevin Page and Tolga R. Yalkin
Part III Experience and Outlook for Crisis-Driven Institutions
10. Sweden: Watchdog with a Broad Remit, Lars Calmfors
11. Hungary: A Short-Lived Fiscal Watchdog, George Kopits and Balazs Romhanyi
12. United Kingdom: Fiscal Watchdog and Official Forecaster, Robert Chote and Simon Wren-Lewis
13. Italy: What Role for an Independent Fiscal Institution?, Fabrizio Balassone, Daniele Franco, and Chiara Goretti