András Bethlendi

Department of Finance, Faculty of Economic and Social Sciences Budapest University of Technology and Economics

Hungary

bethlendi@finance.bme.hu

Fiscal council: European model or new global standard?

Csaba Lentner

Faculty of Science of Public Governance and Administration

National University of Public Service

Hungary

Lentner.Csaba@uni-nke.hu

László Vasa

Management Campus, Széchenyi István University

Hungary 

vasa.laszlo@sze.hu

András Póra

Department of Finance, Faculty of Economic and Social Sciences Budapest University of Technology and Economics

Hungary

pora@finance.bme.hu

Abstract. The great recession of 2008 caused fiscal crises in several countries. This phenomenon highlighted the relevance of the problem of fiscal alcoholism and excessive sovereign debt. Nowadays rules-based fiscal policies have become more and more widespread to limit indebtedness. This article explores one of the most important elements of rules-based systems: the fiscal council. The key question imposed was: is it mostly a European phenomenon, or rather a global standard? As a method, we employed descriptive statistics, then a hierarchical cluster analysis, based on the data of the IMF Fiscal Council Dataset. In conclusion, two separated groups were formed: an EU and a non-EU cluster with some outliers, thus our working hypothesis was underpinned. Our results have thus contributed to the literature and advanced the case that in the last ten years the increased number of fiscal councils can be attributed to international (European) regulations or internal political issues rather than actual enhancements of fiscal prudence.

Received: May, 2019

1st Revision: August, 2019

Accepted: November, 2019

DOI: 10.14254/2071-8330.2019/12-4/3

JEL Classification: E02, E62, F34, F36, H30, H60, H61, H63, H68, H87, P16, P41, P43, P50

Keywords: sovereign debt, rules-based fiscal policy, fiscal council, independent fiscal institutions, fiscal prudence