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The Impact of Budget Transparency on Budget Credibility: Evidence From Croatian Cities

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  • Guillamón María-Dolores

    (María-Dolores Guillamón, PhD, Associate Professor, Faculty of Economics and Business, Department of Financial Economy and Accounting, University of Murcia, Spain)

  • Ríos Ana-María

    (Ana-María Ríos, PhD, Associate Professor, Faculty of Economics and Business, Department of Public Finance, University of Murcia, Spain)

  • Prijaković Simona

    (Simona Prijaković, PhD, Research Associate, Institute of Public Finance, Smičiklasova 21, 10000 Zagreb, Croatia)

Abstract

This paper examines how budget transparency affects budget credibility, i.e., how it affects budget current revenue/expenditure deviations. Specifically, the first objective is to describe how budget transparency affects budget credibility or accuracy of the enacted budget at the local level. The second is to examine if and in which direction budget deviations are systematically biased. The third is to link the accuracy of enacted budgets with political budget cycles’ literature. Budget transparency is measured by the number of published key budget documents on the City’s official websites. Budget credibility is measured by the difference between the planned amount minus the actual amount divided by the actual amount. Our sample comprises balanced panel data for 120 Croatian cities during the period 2016-2021 and system GMM method was used. The findings indicate that cities with greater budget transparency typically underestimate their revenues and overestimate their expenditures. Less transparent cities, on the other hand, frequently overestimate their revenues and underestimate their expenditures, yet ultimately spend more than intended.

Suggested Citation

  • Guillamón María-Dolores & Ríos Ana-María & Prijaković Simona, 2024. "The Impact of Budget Transparency on Budget Credibility: Evidence From Croatian Cities," South East European Journal of Economics and Business, Sciendo, vol. 19(2), pages 119-135.
  • Handle: RePEc:vrs:seejeb:v:19:y:2024:i:2:p:119-135:n:1008
    DOI: 10.2478/jeb-2024-0019
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    More about this item

    Keywords

    budget transparency; budget credibility; local governments; forecasting; enacted budget; year-end report;
    All these keywords.

    JEL classification:

    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures

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