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Transparency and Numeric Rules in the Budgeting Process: Theory and Evidence

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  • Amoroso Nicolás

Abstract

In this paper I develop a simple dynamic agency model postulating that, among budgetary institutions, transparency of the budgeting process is the main driving force in explaining differences in fiscal outcomes and that budgetary numeric rules can be an active long-run constraint only if the budgeting process is transparent enough. The model does not only account for long-run differences where countries with better budgetary institutions will have more disciplined fiscal outcomes, but can rationalize situations where countries with relatively better budgetary institutions can have what would appear to be less disciplined fiscal outcomes in the short-run. Empirical tests corroborate some but not all of the model's predictions.

Suggested Citation

  • Amoroso Nicolás, 2008. "Transparency and Numeric Rules in the Budgeting Process: Theory and Evidence," Working Papers 2008-13, Banco de México.
    • Handle: RePEc:bdm:wpaper:2008-13
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    More about this item

    JEL classification:

    • D70 - Microeconomics - - Analysis of Collective Decision-Making - - - General
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
    • H61 - Public Economics - - National Budget, Deficit, and Debt - - - Budget; Budget Systems

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