Beyond the SGP - Features and effects of EU national-level numerical fiscal rules Joaquim Ayuso-i-Casals*, Xavier Debrun**, Manmohan S. Kumar**, Laurent Moulin*, and Alessandro Turrini*** *European Commission, **International Monetary Fund, ***European Commission and CEPR Paper presented at the October 2007 Economic Policy Panel in Lisbon SUMMARY This paper provides a comprehensive analysis of numerical fiscal rules implemented at the national level in 25 countries of the European Union, using a unique, survey-based dataset. It explores the possible reasons for the growing reliance on such rules and assesses the influence of numerical fiscal rules on fiscal performance. Both the introduction of the EU fiscal framework and country-specific fiscal governance features played a role on triggering the introduction of numerical fiscal rules at national level. The impact of rules on fiscal discipline appears statistically robust and quantitatively important. While unobserved social preferences for fiscal conservatism could jointly determine outcomes and rules, the analysis suggests that rules shape fiscal behaviour rather than vice versa. It also appears that the design of rules matters for their effectiveness. In particular, rules specifically designed to avoid or reduce conflicts with the stabilisation function of fiscal policy are associated with less pro-cyclical policies. Acknowledgements: This paper expands analytical material prepared for the 2006 Public Finance in EMU European Commission report. Earlier versions benefited from insightful comments by Elena Flores and Servaas Deroose, and participants to the European Commission workshop on "The Role of National Fiscal Rules and Institutions in Shaping Budgetary Outcomes", Brussels, 24 November 2006, and to the Banca d' Italia workshop on "Fiscal policy: Current Issues and Challenges", Perugia 29-31 March 2007. Diana Gonzalez Hernandez contributed to a previous version of the paper. The views expressed in this paper are the authors’ own and do not necessarily reflect those of the European Commission or the IMF.