Emilia Skrok

This book provides analytical contributions to the design of fiscal rules in small economies in the Latin America and the Caribbean region. These economies usually face high levels of output volatility, large terms-of-trade shocks, and exposure to natural disasters. The relationship between fiscal rules and economic size has not been systematically assessed in the literature. Determining which fiscal rules are most appropriate for smaller economies can contribute toward improving their design and effectiveness. The study reviews the performance of fiscal rules worldwide and provides information on which rule types are most common, which have the best record for compliance, and which features tend to improve their performance. It provides practical policy directions drawn from international experience to assist policymakers of smaller economies in designing and implementing more effective fiscal rules.

This study finds that pension reforms in recent years have improved the efficiency and sustainability of pension systems in the new member states of the European Union and Croatia. However, for many countries, these probably have not gone far enough to ensure long-term sustainability, given the aging of the population. Reforms have included changes to Pay-As-You-Go (PAYG) systems, including increases in retirement ages (not at least for women), new benefit formulas, and new indexation mechanism. Some countries (Latvia and Poland) have further strengthened the link of contributions and benefits to the sustainability of the PAYG system through the introduction of national defined contribution accounts. The link is strengthened also by moving to a point system, which has been adopted by many of the countries. Several countries have introduced a second, private, pension pillar, funded through diversion of part of the pension contributions, thereby diversifying risk. However, some countries (in particular the Czech Republic, Slovenia, and Romania) will need to do more to safeguard the long-term viability of their pension systems, while others face challenges to ensure equitable pension systems and adequate living standards for all elderly people.