Does Media Visibility Make EU Fiscal Rules More Effective?

This paper provides a quantitative assessment on the impact of media reporting about fiscal rules and fiscal councils on the effectiveness of EU fiscal rules. Media visibility can contribute to more effective fiscal rules, since it can improve transparency, contribute to a more informed debate and act as an informal enforcement device for non-compliance, through reputational damage. Some international organisations take media visibility into account when assessing the strength of fiscal frameworks. However, the strength of media visibility has been based on expert judgement, which can provide a subjective and incomplete picture. The paper explores a novel media database of almost 300 million of articles maintained by the Commission, covering 27 EU Member States and the UK in 2004-2020. We analyse the media sources using a text mining approach, which has been applied frequently in the economic literature to assess the effects of media visibility on financial markets. The key findings can be summarised as follows: First, media reporting on fiscal rules appears to be more frequent in countries with well-developed fiscal institutions, but also during bad economic times or when the Commission releases its key fiscal policy news. Second, nationwide and influential media appear to report relatively more frequently on fiscal rules than regional media. References to fiscal rules in the media refer either to the need to keep public debt under control or to support growth and avoid austerity-related inequality, which reflects the existence of different views regarding the main objective of fiscal rules: fiscal sustainability vs. macroeconomic stabilisation. Third, panel regressions show that media visibility appear to have contributed to the effectiveness of EU fiscal rules, as measured by the stronger numerical compliance with these rules. Media from nationwide sources tend to be more effective than regional media. Finally, the creation of fiscal councils appears to have further increased the media reporting on fiscal rules..