CONICET | Buscador de Institutos y Recursos Humanos

The State has two essential tools to achieve the goal of macroeconomics stability, monetary policy and fiscal policy. However, the progress in terms of behavioral rules has been greater in the case of monetary policy. This article aims to make a contribution in relation to the mechanism that should be followed by a fiscal rule to promote a counter-cyclical behavior, without questioning the solvency of the public sector. To do so, the flexibility of the rule is fundamental, through a proper selection of its base and a clear and transparent escape clause. Once described its desirable characteristics, a generic fiscal rule is proposed, which has to be adapted to each particular case. This is done for the case of Spain in the years prior to the last crisis. Finally, it is concluded that a well-designed fiscal rule can be really useful not only for purposes of solvency and stability but also as a guide for discretion.