Evaluating Designs for a Fiscal Rule in Bulgaria /

The enhanced Stability and Growth Pact calls on euro area members and aspirants to set boundaries to fiscal deficits through high-level legislation. A limit on the deficit, such as the deficit ceiling in Bulgaria's organic budget law, serves to protect solvency. The recent crisis clearly indica...

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Bibliographic Details
Main Author: Andritzky, Jochen
Format: Journal
Language:English
Published: Washington, D.C. : International Monetary Fund, 2011.
Series:IMF Working Papers; Working Paper ; No. 2011/272
Online Access:Full text available on IMF
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520 3 |a The enhanced Stability and Growth Pact calls on euro area members and aspirants to set boundaries to fiscal deficits through high-level legislation. A limit on the deficit, such as the deficit ceiling in Bulgaria's organic budget law, serves to protect solvency. The recent crisis clearly indicated that the key challenges are not only to contain the deficit but also to avoid a procyclical stance during upswings and to build a buffer for rainy days. Ideally, fiscal policymaking is guided by a fiscal rule that adapts through the economic cycle. This paper lays out the objectives of fiscal rules and analyzes how these objectives can be met in Bulgaria through either a growth-adjusted balance rule or an expenditure rule complemented by a deficit ceiling. 
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