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The influence of transparency on budget forecast deviations in municipal governments

Author

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  • Ana†María Ríos
  • María†Dolores Guillamón
  • Bernardino Benito
  • Francisco Bastida

Abstract

This paper analyzes the impact of transparency on fiscal performance. Our sample considers the 100 largest Spanish municipalities for the years 2008, 2009, 2010, 2012, and 2014. The results show that the level of municipal transparency influences budget forecast deviations in tax revenues and current expenditures. On the one hand, less transparent municipalities overestimate their revenues, allowing them to provide more public services without an immediate increase in taxes. On the other, these local governments, which are aware of the overestimation of their revenues, may spend less than they budgeted. More transparent municipalities, meanwhile, seem to be more prudent in their revenue estimations, since they underestimate their revenues, meaning they can spend more than projected. Our results also show that the behavior of politicians is influenced by the phase of the electoral cycle in which they find themselves, with politicians overestimating expenditures in the year before election.

Suggested Citation

  • Ana†María Ríos & María†Dolores Guillamón & Bernardino Benito & Francisco Bastida, 2018. "The influence of transparency on budget forecast deviations in municipal governments," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 37(4), pages 457-474, July.
    • Handle: RePEc:wly:jforec:v:37:y:2018:i:4:p:457-474
    DOI: 10.1002/for.2513
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    Cited by:

    1. Qiuxia Yang, 2020. "Fiscal Transparency and Public Service Quality Association: Evidence from 12 Coastal Provinces and Cities of China," JRFM, MDPI, vol. 14(1), pages 1-14, December.
    2. Jianan Liu & Ni Dai & Yuan Sui & Asmatullah Yaqoubi, 2023. "A Study on the Impact of Fiscal Decentralization on Regional Green Development: A Perspective Based on the Emphasis on Sports," Sustainability, MDPI, vol. 15(16), pages 1-17, August.
    3. Bronić Mihaela & Stanić Branko & Prijaković Simona, 2022. "The Effects of Budget Transparency on the Budget Balances and Expenditures of Croatian Local Governments," South East European Journal of Economics and Business, Sciendo, vol. 17(1), pages 111-124, June.
    4. Mancini, Anna Laura & Tommasino, Pietro, 2023. "Fiscal rules and the reliability of public investment plans: Evidence from local governments," European Journal of Political Economy, Elsevier, vol. 79(C).
    5. 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.
    6. Nada Azmy ElBerry & Stijn Goeminne, 2021. "Fiscal transparency, fiscal forecasting and budget credibility in developing countries," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 40(1), pages 144-161, January.

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