Do Fiscal Rules Curb Procyclical Fiscal Risks——Empirical Analysis Based on the Characteristics of the Second Generation Rules

Good fiscal rule constraint is an important content of establishing standardized fiscal governance system. This paper uses the European Commission Fiscal Rule Dataset (ECFRD) to empirically analyze the effect of implementing fiscal rules on procyclical fiscal policies, and analyzes the cyclical balance characteristics of the second generation fiscal rules from the perspective of economic cycle fluctuations. The main findings are as follows: First, the implementation of fiscal rules can significantly reduce the procyclical characteristics of fiscal policies and slow down the procyclical fiscal risks; Second, from the perspective of different fiscal rules, expenditure rules and debt rules can effectively control procyclical fiscal risks, while revenue rules and budget balance rules have no significant impact. Third, in the second generation of fiscal rules, the influence coefficient of expenditure rule on fiscal policy procyclicality has been significantly increased, while the revenue rules has no obvious change. However, the budget balance rules and debt rules change to non-significant effect, and the time delay of implementation effect may be an important reason for this phenomenon. Fourth, fiscal rules with the characteristics of supervision mechanism and sanctions against violations can enhance the restraint effect on procyclicality, and improving the openness and flexibility strength of fiscal rules can promote the procyclicality of national fiscal to a certain extent. In conclusion, exploring the formal financial rules system will help to establish the modern financial governance system, promote the sustainable development of finance, and further guarantee the stability of the anti-cyclical financial policy.