Fiscal rules curb excessive spending, stabilize economies in times of plenty.
The study looked at how fiscal rules and fiscal space affect government spending. Fiscal rules are linked to more fiscal space. Countries with more fiscal space tend to spend more, but this effect is reduced with fiscal rules. Fiscal policy is more likely to follow economic cycles in countries with ample fiscal space, but this tendency is lessened with fiscal rules. Expenditure rules have the strongest impact, followed by balanced budget rules, while debt rules have no significant effect.