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Budget Transparency and Fiscal Performance: Do Open Budgets Matter?

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Author Info

  • Lucie Sedmihradská

    ()
    (University of Economics, Prague)

  • Jakub Haas

    ()
    (University of Economics, Prague)

Abstract

Existing published research into the relationship between budget transparency and fiscal performance confirms the expectations that higher budget transparency is associated with smaller budget deficits and lower public debt. However, our previous research did not bring such clear results but raised a fundamental question: Why should greater transparency improve fiscal performance? The objective of this paper is to re-evaluate the relationship between budget transparency and fiscal performance. Based on the literature review we have identified three channels through which increased transparency may limit excessive public expenditure resulting in budget deficit and public debt: (1) reduced fiscal illusion, (2) decreased information asymmetry between politicians and voters which may improve accountability and increase political competition, and (3) strengthening in the enforcement of fiscal rules. The results of statistical analysis (conditional means analysis for 2008, correlation and regression analysis for 2003 to 2009) did not prove a significant negative relationship between budget transparency, measured by the Open Budget Index, and budget deficit or public debt. We found a negative and statistically significant relationship between corruption and budget transparency.

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Bibliographic Info

Article provided by University of Finance and Administration in its journal ACTA VSFS.

Volume (Year): 7 (2013)
Issue (Month): 2 ()
Pages: 109-122

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Handle: RePEc:prf:journl:v:7:y:2013:i:2:p:109-122

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Keywords: budget transparency; fiscal performance; Open Budget Index;

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  1. Dollery, Brian E & Worthington, Andrew C, 1996. " The Empirical Analysis of Fiscal Illusion," Journal of Economic Surveys, Wiley Blackwell, vol. 10(3), pages 261-97, September.
  2. Alt, James E. & Lassen, David Dreyer, 2006. "Fiscal transparency, political parties, and debt in OECD countries," European Economic Review, Elsevier, vol. 50(6), pages 1403-1439, August.
  3. International Monetary Fund, 2005. "Fiscal Transparency and Economic Outcomes," IMF Working Papers 05/225, International Monetary Fund.
  4. Rose, Shanna, 2010. "Institutions And Fiscal Sustainability," National Tax Journal, National Tax Association, vol. 63(4), pages 807-37, December.
  5. Isabelle Joumard & Per Mathis Kongsrud & Young-Sook Nam & Robert Price, 2003. "Enhancing the Cost Effectiveness of Public Spending: Experience in OECD Countries," OECD Economic Studies, OECD Publishing, vol. 2003(2), pages 109-161.
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