measures in the areas of fiscal structural reform (such as expenditure rationalization) and the government
accounting and budget systems.
In Germany, the “Working Group on Tax Estimates” publishes regular estimates of government
revenues. It consists of government officials, academics, and representatives of the Council of Economic
Experts and has a reputation of relative independence.^22
The Central Planning Bureau (CPB)^23 of the Netherlands conducts independent analyses and provides the
economic assumptions for the budget. It conducts research on a broad range of economic issues,
including fiscal, labor market, and regulatory policies. The CPB also plays a role in the development of
the budget policy contained in the coalition agreements. All political parties use the CPB’s economic
assumptions for their policy platforms, and the larger parties submit their platforms to the CPB ahead of
elections for assessment. After the elections, the CBP assesses compromises negotiated for coalition
agreements.
Box 3 - Chile: The Interaction of Fiscal Rules and a Fiscal Agency
Recent changes in Chile’s fiscal institutional setup have been consciously designed to further buttress fiscal
sustainability and help dampen the effects of cyclical fluctuations. Since 2001, policy has been based on the rule
of maintaining ex ante a structural surplus of 1percent of GDP for the central government. According to the
rule, fiscal expenditures follow the dynamics of structural revenue, that is, the revenue that would be achieved if
the economy were operating at full potential, and the price of copper (Chile’s main export) were at its long-term
level.
To strengthen the implementation of the rule, the projection of the inputs into the trend GDP estimate and of
copper prices was delegated to two independent expert panels. The panelists estimate individually the growth of
the labor force, real investment, and total labor productivity. The estimates are then averaged eliminating the
two most extreme values and used by the finance ministry to estimate trend GDP through a production function
approach. Such a methodology is likely to avoid under or overestimation or underestimation of potential GDP: a
downturn in the pace of activity is likely to impart a downward bias to the potential that is likely to result in a
more expansive policy while a rebound is likely to go in the opposite direction. In addition, a second panel
produces 10-year forecasts of the price of copper which are also averaged excluding the two most extreme
values.
Despite a largely technical mandate, the panels play a key role in the budget process. The combination of the
structural balance rule and the independent panel was adopted to signal policy credibility, while at the same
time maintaining some policy flexibility. Together they aim to give more stability to public expenditure
preventing excessive adjustments in periods of recession or unsustainable expenditures during boom years. The
panel’s role ensures that the underlying economic assessment is separate from other considerations in the budget
preparation and implementation.Box 4 - United States: The Congressional Budget Office
The Congressional Budget Office (CBO) was established in 1975 to inform the U.S. Congress on fiscal issues.
As part of a comprehensive reform, it was intended to contribute to compliance with the then newly created
congressional budget process. Both were designed to give Congress the capacity to act independently of the
president on revenue and spending matters. Its mission is “to provide the congress with the objective, timely,
nonpartisan analyses needed for budget and economic decisions and with the information and estimates required
for the Congressional budget process.” In doing so, the CBO produces a large number of reports and its senior
staff regularly testifies before Congress.
The CBO plays a key role in the annual budgeting process and in budget monitoring. Particularly important is(^22) In addition, the Council of Economic Experts (see http://www.sachverstaendigenrat-witschaft.de)) advises the government and
parliament on economic policy, but does not make specific recommendations and does not analyze the budget in a
comprehensive manner. The government is required to respond formally to the annual report.
(^23) Also called “Netherlands Bureau of Economic Policy Analysis” (website: http://www.cpb.nl/eng)..)