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Fiscal Transparency and Fiscal Policy Outcomes in OECD Countries

  • James E. Alt

    (Harvard University)

  • David Dreyer Lassen

    (Economic Policy Research Unit, University of Copenhagen)

It is widely believed and often argued that fiscal, or budgetary, transparency has large, positive effects on fiscal performance. However, the evidence linking transparency and fiscal policy outcomes is far from compelling. We present a career-concerns model with political parties to analyze the effects of fiscal transparency on public debt accumulation. To test the predictions of the model, we construct a replicable index of fiscal transparency. Simultaneous estimates of debt and transparency on 19-country OECD data strongly confirm that a higher degree of fiscal transparency is associated with lower public debt and deficits.

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Paper provided by Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics in its series EPRU Working Paper Series with number 03-02.

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Length: 43 pages
Date of creation: Feb 2003
Date of revision:
Handle: RePEc:kud:epruwp:03-02
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  1. Svensson, Lars E.O. & Faust, John, 1998. "Transparency and Credibility: Monetary Policy with Unobservable Goals," Seminar Papers 636, Stockholm University, Institute for International Economic Studies.
  2. F. Andrew Hanssen, 2004. "Is There a Politically Optimal Level of Judicial Independence?," American Economic Review, American Economic Association, vol. 94(3), pages 712-729, June.
  3. repec:cup:cbooks:9780521664103 is not listed on IDEAS
  4. repec:cup:cbooks:9780521662918 is not listed on IDEAS
  5. Jensen, Henrik, 2002. " Optimal Degrees of Transparency in Monetary Policymaking," Scandinavian Journal of Economics, Wiley Blackwell, vol. 104(3), pages 399-422, September.
  6. Ricardo Hausmann & Alberto Alesina & Rudolf Hommes & Ernesto H. Stein, 1998. "Budget Institutions and Fiscal Performance in Latin America," Research Department Publications 4160, Inter-American Development Bank, Research Department.
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