As governments around the world struggleto piece together the most effective fiscal response tocounter the economic and social impact of the COVID-19outbreak, some are facing constraints imposed by fiscalrules enacted in the past to ensure fiscal discipline. Theoutbreak has revealedthe weaknesses and inappropriateness ofmany existing fiscal rules, and authorities should take theopportunity to strengthen their fiscal rules by adoptingfeatures that make them more flexible, operational, andenforceable. Research shows that the de facto strength andcredibility of the fiscal rule is what matters for fiscaldiscipline, not the mere de jure existence of one. Asimportant as it is that fiscal rules include contingenciesto accommodate large and effective fiscal responses tosevere and unprecedented crises, it is also as importantthat fiscal rules provide clear guidance for building upsavings in times of positive shocks.
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