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Lack of fiscal transparency and economic growth expectations: an empirical assessment from a large emerging economy

Author

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  • Helder Ferreira de Mendonça

    (Fluminense Federal University
    National Council for Scientific and Technological Development (CNPq))

  • Vítor Ribeiro Laufer Calafate

    (Fluminense Federal University)

Abstract

This paper provides empirical evidence of the lack of fiscal transparency’s effect (fiscal opacity) on the government’s budget deficit on economic growth expectations. Based on the Brazilian data from 2004 to 2018 and using signal-to-noise ratios, we built fiscal opacity indicators that measure the agents’ level of ignorance regarding the government’s budget deficit. The evidence from several regression models indicates that an increase in fiscal opacity undermines short-term expectations of economic growth (current year, 12 months ahead, and next calendar year). Moreover, the impact of fiscal opacity on growth expectations is more significant when we consider the manufacturing sector. The findings suggest that discretionary fiscal policy can damage economic growth expectations.

Suggested Citation

  • Helder Ferreira de Mendonça & Vítor Ribeiro Laufer Calafate, 2021. "Lack of fiscal transparency and economic growth expectations: an empirical assessment from a large emerging economy," Empirical Economics, Springer, vol. 61(6), pages 2985-3027, December.
    • Handle: RePEc:spr:empeco:v:61:y:2021:i:6:d:10.1007_s00181-020-02000-4
    DOI: 10.1007/s00181-020-02000-4
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    4. Gabriel Caldas Montes & Paulo Henrique Lourenço Luna, 2022. "Do fiscal opacity, fiscal impulse, and fiscal credibility affect disagreement about economic growth forecasts? Empirical evidence from Brazil considering the period of political instability and presid," Review of Development Economics, Wiley Blackwell, vol. 26(4), pages 2356-2393, November.

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    More about this item

    Keywords

    Lack of fiscal transparency; Economic growth expectations; Government’s budget deficit;
    All these keywords.

    JEL classification:

    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • H68 - Public Economics - - National Budget, Deficit, and Debt - - - Forecasts of Budgets, Deficits, and Debt

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