The views expressed are those of the authors and do not necessarily reflect those of the Bank of England. We thank Angus Guyatt for outstanding research support. We thank Reza Bahar, Patricia Jackson and other Bank of England colleagues for valuable comments and Angus Guyatt and Steve Grice for research assistance. Copies of working papers may be obtained from Publications Group, Bank of England,

Budget rules can be defined as legislated or constitutional constraints on government deficits, taxes, expenditures, or debt. This paper reviews the budget rules recently legislated in six of Canada's provinces and both of its territories, as well as budget rules in other OECD countries. In theory, budget rules appear to be justified if their cost in terms of foregone fiscal stabilization is outweighed by benefits such as discouraging government debt accumulation and reduced risk premiums on government borrowing. Recent empirical evidence on the effectiveness of budget rules and their consequences for fiscal stabilization is examined in detail. In light of this evidence, the paper assesses the possible implications of budget-rule legislation in Canada on fiscal performance, macroeconomic stabilization, and monetary policy. Résumé Les règles budgétaires peuvent être définies comme des contraintes établies par voie législative ou constitutionnelle en vue de limiter les déficits, les dép...

Tous droits réservés pour tous les pays. Toute traduction et toute reproduction sous quelque forme que ce soit est interdite. Les textes publiés dans la série «Les Cahiers du CREF » de HEC Montréal n'engagent que la responsabilité de leurs auteurs. La publication de cette série de rapports de recherche bénéficie d'une subvention du programme de l'Initiative de la nouvelle économie (INE) du Conseil de recherches en sciences humaines du Canada (CRSH).The Ordered Qualitative Model for Credit Rating