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Budget Transparency and Fiscal Performance: Do Open Budgets Matter?

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  • 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.

Suggested Citation

  • Lucie Sedmihradská & Jakub Haas, 2013. "Budget Transparency and Fiscal Performance: Do Open Budgets Matter?," ACTA VSFS, University of Finance and Administration, vol. 7(2), pages 109-122.
    • Handle: RePEc:prf:journl:v:7:y:2013:i:2:p:109-122
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    References listed on IDEAS

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    1. Alberto F. Alesina & Roberto Perotti, 1999. "Budget Deficits and Budget Institutions," NBER Chapters, in: Fiscal Institutions and Fiscal Performance, pages 13-36, National Bureau of Economic Research, Inc.
    2. Isabelle Joumard & Per Mathis Kongsrud & Young-Sook Nam & Robert Price, 2004. "Enhancing the Cost Effectiveness of Public Spending: Experience in OECD Countries," OECD Economic Studies, OECD Publishing, vol. 2003(2), pages 109-161.
    3. International Monetary Fund, 2005. "Fiscal Transparency and Economic Outcomes," IMF Working Papers 2005/225, International Monetary Fund.
    4. Dollery, Brian E & Worthington, Andrew C, 1996. "The Empirical Analysis of Fiscal Illusion," Journal of Economic Surveys, Wiley Blackwell, vol. 10(3), pages 261-297, September.
    5. Poterba, James M. & von Hagen, Jurgen (ed.), 1999. "Fiscal Institutions and Fiscal Performance," National Bureau of Economic Research Books, University of Chicago Press, edition 1, number 9780226676234, December.
    6. James M. Poterba & Jürgen von Hagen, 1999. "Fiscal Institutions and Fiscal Performance," NBER Books, National Bureau of Economic Research, Inc, number pote99-1, March.
    7. 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.
    8. Mr. George Kopits & Mr. J. D. Craig, 1998. "Transparency in Government Operations," IMF Occasional Papers 1998/001, International Monetary Fund.
    9. Rose, Shanna, 2010. "Institutions and Fiscal Sustainability," National Tax Journal, National Tax Association;National Tax Journal, vol. 63(4), pages 807-837, December.
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    Cited by:

    1. Ana Monica Pop, 2018. "A Brief Analysis Of The Public Institutions Buget: Theoretical And Practical Approaches," JOURNAL STUDIA UNIVERSITATIS BABES-BOLYAI NEGOTIA, Babes-Bolyai University, Faculty of Business.
    2. A. Abdulhakeem, Kilishi,, 2020. "Budget Transparency and Fiscal Performance: Lessons for Nigeria and Sri Lanka," Working Papers 5, Department of Economics, University of Ilorin.
    3. Emna Trabelsi, 2019. "Do independence and transparency matter for bank development? A new lookup on emerging and developing countries," Post-Print hal-02162780, HAL.
    4. Fazlı YILDIZ, & Ersin Nail SAGDIC, & Guner TUNCER, 2017. "Budgetary Transparency, E-Government And Corruption: New Evidence From Panel Data Approach," EcoForum, "Stefan cel Mare" University of Suceava, Romania, Faculty of Economics and Public Administration - Economy, Business Administration and Tourism Department., vol. 6(1), pages 1-55, January.
    5. Remus Ionut Naghi & Gheorghen Preda & Anca Cristina Dragomir, 2018. "The Relationship Between Internal Market Orientation And Employee Job Satisfaction: The Case Of The Romanian Banking Sector," JOURNAL STUDIA UNIVERSITATIS BABES-BOLYAI NEGOTIA, Babes-Bolyai University, Faculty of Business.
    6. Erika Kulcsar & Tunde Csoma & Noemi Fulop & Noemi Szonda & Kinga-Izabella Timar & Dorottya Vitalyos, 2018. "Mass Communication And Female Shaping Power," JOURNAL STUDIA UNIVERSITATIS BABES-BOLYAI NEGOTIA, Babes-Bolyai University, Faculty of Business.
    7. Mourão Paulo Reis & Bronić Mihaela & Stanić Branko, 2023. "The Impact of Local Governments’ Budget Transparency on Debt in Croatia," South East European Journal of Economics and Business, Sciendo, vol. 18(2), pages 21-33, December.
    8. Francisco Cifuentes-Silva & Daniel Fernández-Álvarez & Jose Emilio Labra-Gayo, 2020. "National Budget as Linked Open Data: New Tools for Supporting the Sustainability of Public Finances," Sustainability, MDPI, vol. 12(11), pages 1-12, June.

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    More about this item

    Keywords

    budget transparency; fiscal performance; Open Budget Index;
    All these keywords.

    JEL classification:

    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • H60 - Public Economics - - National Budget, Deficit, and Debt - - - General

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