Fiscal rules in the Canadian provinces: Abject failure or qualified success?

Abstract

Most Canadian provinces have introduced legislation to require politicians of all ideological stripes to meet annual balanced budget (BB) targets. Critics of this type of legislation argue that it is unnecessary, confining, and subject to manipulation. We examine provincial balanced budget legislation before and after the Great Recession and argue that the response of provinces needs to be evaluated taking into account the multiple objectives of fiscal policy and the behavioural changes that the rules introduce, including creative non‐compliance. Rules should be evaluated on their ability to contribute to good fiscal governance rather than on their stringency.

The Impact of Fiscal Rules on the Financial Management of Higher Self-Governing Units in the Slovak Republic

“…Other studies are devoted to the impact of fi scal rules on the budgets of local governments, e.g. in Switzerland (Burret and Feld 2018a, 2018b), Spain (Bel et al 2018;de Vincente et al 2017), India (Chakraborty and Dash 2017), USA (Jimenez 2017), Canada (Atkinson et al 2016), OECD local governments (Van Rompuy 2016,) etc.…”

Do Balanced Budget Laws Matter in Recessions?

“…Figure shows that on average BBLs became more stringent after 1997, when most provinces had completed fiscal consolidations and introduced their first BBL (Tapp ). However, not all provinces adopted BBLs during only good times; half of the eight provinces adopted BBLs when they had achieved a surplus and aimed to lock in fiscal gains, while the other four provinces introduced their first BBLs at the beginning or in the middle of a fiscal consolidation—when governments were still deeply in deficit (Atkinson, Mou, and Bruce ). Once the 2008–2009 recession occurred, both the average stringency of BBLs and average budget balances fell.…”

“…Once the 2008–2009 recession occurred, both the average stringency of BBLs and average budget balances fell. Again, not all BBLs were abandoned during this difficult time; half of the provinces with BBLs—four of the eight—weakened their rules in the recession and recovery period of 2009–2010, but the other half maintained the stringency of their laws (Atkinson, Mou, and Bruce ).…”

“…The first nation‐wide test of the relatively new Canadian BBLs was the 2008–2009 global recession when some provinces were forced to amend their rules in response to the harsh economic reality (Atkinson, Mou, and Bruce ; Simpson and Wesley ). In addition to this challenge, provinces experienced various province‐specific recessions long before the 2008–2009 national level recession.…”

Réformes démocratiques et finances publiques : enjeux et défis actuels

“…D'autres s'intéressent à l'influence des transferts fédéraux sur les budgets provinciaux (Pétry et al, 2000 ;Tellier, 2009). Enfin, certains s'attardent aux lois d'équilibre budgétaire (Imbeau et Tellier, 2004 ;Atkinson et al, 2016).…”