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Fiscal Gimmickry in Europe: One-Off Measures and Creative Accounting

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Author Info
Vincent Koen
Paul van den Noord ()

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Abstract

Accounting conventions usually leave some room for judgment, which governments may be tempted to take advantage of, especially when fiscal rules bite or threaten to do so. The European experience over the past decade -- documented here in great detail -- illustrates that fiscal gimmicks come in many different guises, but also that some are less mischievous than others. Logit regression analysis confirms that when deficit rules or, to a lesser extent, debt thresholds tend to become more binding, recourse to gimmicks is more likely. It also suggests that more centralised budget systems are less prone to such gimmickry. The policy implications are clear as regards the virtues of transparent and consistent accounting practices, but more ambiguous regarding the merits or otherwise of one-off measures ...

Astuces budgétaires en Europe : Mesures non récurrentes et créativité comptable

En général, les conventions comptables sont sujettes à interprétation, et les gouvernements peuvent être tentés d’en profiter, notamment lorsqu’ils sont contraints, ou en voie de l’être, par des règles budgétaires. L’expérience européenne au cours de la décennie écoulée -- décrite ici avec force détails -- montre que les astuces budgétaires sont protéiformes, mais aussi que certaines posent moins de problèmes que d’autres. Des régressions logit confirment que lorsque les règles sur les déficits ou, dans une moindre mesure, les seuils d’endettement deviennent plus contraignants, la probabilité d’un recours à des astuces augmente. Elles corroborent également l’idée que les astuces tendent à être moins employées dans des systèmes budgétaires plus centralisés. Les implications de politique économique sont claires s’agissant des vertus de la transparence et de la cohérence des comptes, mais plus ambiguës concernant les mérites ou inconvénients des mesures non récurrentes ...

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Paper provided by OECD Economics Department in its series OECD Economics Department Working Papers with number 417.

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Date of creation: 10 Feb 2005
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Handle: RePEc:oec:ecoaaa:417-en

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Keywords: public debt dette publique budgets budget fiscal rules règles budgétaires Economic and Monetary Union Union économique et monétaire stability and growth pact pacte de stabilité et de croissance fiscal deficit fiscal gimmicks national accounts political economy déficit budgétaire astuce budgétaire comptes nationaux économie politique

Find related papers by JEL classification:
D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy-Making and Implementation
E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
H27 - Public Economics - - Taxation, Subsidies, and Revenue - - - Other Sources of Revenue
H6 - Public Economics - - National Budget, Deficit, and Debt
H74 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Borrowing
H81 - Public Economics - - Miscellaneous Issues - - - Governmental Loans and Credits
H82 - Public Economics - - Miscellaneous Issues - - - Governmental Property
H87 - Public Economics - - Miscellaneous Issues - - - International Fiscal Issues; International Public Goods

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  1. Peter Wierts, 2007. "The sustainability of euro area debt: a re-assessment," DNB Working Papers 134, Netherlands Central Bank, Research Department. [Downloadable!]
  2. Buti, Marco & Martins, Joao Nogueira & Turrini, Alessandro Antonio, 2006. "From Deficits to Debt and Back: Political Incentives under Numerical Fiscal Rules," CEPR Discussion Papers 5809, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  3. Teresa Leal & Javier J. Pérez & Mika Tujula & Jean-Pierre Vidal, 2007. "Fiscal forecasting - lessons from the literature and challenges," Working Paper Series 843, European Central Bank. [Downloadable!]
  4. Roel M.W.J. Beetsma & Frederick van der Ploeg, 2007. "Partisan Public Investment and Debt: The Case for Fiscal Restrictions," Economics Working Papers ECO2007/37, European University Institute. [Downloadable!]
  5. Anthony Annett, 2006. "Enforcement and the Stability and Growth Pact: How Fiscal Policy Did and Did Not Change Under Europe's Fiscal Framework," IMF Working Papers 06/116, International Monetary Fund. [Downloadable!]
  6. Kerstin Bernoth & Guntram B. Wolff, 2006. "Fool the Markets? Creative Accounting, Fiscal Transparency and Sovereign Risk Premia," CESifo Working Paper Series CESifo Working Paper No. , CESifo GmbH. [Downloadable!]
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  7. Álvaro Pina & Nuno Venes, 2007. "The Political Economy of EDP Fiscal Forecasts: An Empirical Assessment," Working Papers 2007/23, Department of Economics at the School of Economics and Management (ISEG), Technical University of Lisbon.. [Downloadable!]
  8. Richard Morris & Hedwig Ongena & Ludger Schuknecht, 2006. "The reform and implementation of the Stability and Growth Pact," Occasional Paper Series 47, European Central Bank. [Downloadable!]
  9. Ludger Schuknecht, 2004. "EU fiscal rules: issues and lessons from political economy," Working Paper Series 421, European Central Bank. [Downloadable!]
  10. Buti, Marco & Eijffinger, Sylvester & Franco, Daniele, 2005. "The stability pact pains : a forward-looking assessment of the reform debate," Discussion Paper 101, Tilburg University, Center for Economic Research. [Downloadable!]
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  11. Roel Beetsma & Heikki Oksanen, 2007. "Pension Systems, Ageing and the Stability and Growth Pact," CESifo Working Paper Series CESifo Working Paper No. , CESifo GmbH. [Downloadable!]
  12. Beetsma, Roel & van der Ploeg, Frederick, 2007. "The Political Economy of Public Investment," CEPR Discussion Papers 6090, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  13. Jana Kremer & Claudia Rodrigues Braz & Teunis Brosens & Geert Langenus & Sandro Momigliano & Mikko Spolander, 2006. "A disaggregated framework for the analysis of structural developments in public finances," Working Paper Series 579, European Central Bank. [Downloadable!]
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  14. Eric Maskin & Jean Tirole, 2006. "Public-private Partnerships and Government Spending Limits," Economics Working Papers 0075, Institute for Advanced Study, School of Social Science. [Downloadable!]
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  15. Gábor P. Kiss, 2007. "One-off and off-budget items: An alternative approach," MNB Conference Volume, Magyar Nemzeti Bank (The Central Bank of Hungary), vol. 1(1), pages 18-27, December. [Downloadable!]
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