excessive deficits in good times. Fiscal rules also tend to foster creative accounting, as governments seek to comply with the rules without making unpopular choices. More generally, fiscal rules strengthen the unintended effects of accounting choices. Rules that limit the cash deficit, for example, can encourage the build-up of spending or tax-refund arrears and discourage spending on revenue-generating public investments (Easterly and Servén 2003, Blanchard and Giavazzi 2008, Servén 2008). At worst, governments may adopt fiscal rules with little intention of following them, perhaps to please international advisers and lenders (see Andrews 2003, Schick 2013).

**To work, fiscal rules need the support of public financial management** . It must be possible to measure whether the government has complied with the rules, so reliable accounts and statistics are needed. The measurements should also be credible to outsiders, so it is helpful if accounts and statistics follow international standards and are independently audited or prepared. It is easier for a government to follow fiscal rules if it has unbiased and reasonably accurate forecasts and understands the risks surrounding those forecasts. Having an independent fiscal institution make or check the forecasts can help ensure that the government’s predictions of compliance with rules are believable. Since most tax and spending programs cannot efficiently be changed overnight, effective systems of medium-term planning are valuable. And good budgeting and expenditure control can help the government to stick to the spending plans it has made.

**The main alternative to fiscal rules is to rely on quantitative fiscal targets and good public financial management.** Well-designed budgeting, forecasting, accounting, and fiscal statistics can reveal the long-term fiscal costs of short-sighted policies, and a focus on prudent fiscal policy can be encouraged by a procedural rule requiring the government to announce its fiscal targets and to report publicly on whether it has achieved them. This approach is not legally constraining, but by raising the political costs of running of an imprudent fiscal policy, it may have an effect similar to that of fiscal rules. Indeed, though fiscal targets are different from fiscal rules that are externally imposed and rigorously enforced, they may be similar to self-imposed fiscal rules.

**Reliable empirical evidence on the effects of fiscal rules is hard to obtain** . Countries with fiscal rules tend to have lower debts and deficits than other countries (Eyraud and others 2018), which suggests that fiscal rules work. But disentangling cause and effect is difficult. The countries that adopt fiscal rules may be those in which there is the greatest popular support for fiscal discipline, so a positive association does not imply that it is the rules that are causing the discipline: the rules and the discipline may both be expressions of the underlying social preferences. Conversely, evidence that fiscal rules are often breached does not imply that the rules are not helping: it is possible that fiscal performance would have been even worse in the absence of the rules.

**Recent evidence suggests that strong fiscal rules reduce deficits, at least in some countries** . Summarizing recent empirical work, Eyraud and others (2018) conclude that “strong” fiscal rules reduce deficits—where the strength of rules increases with factors such as independent

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