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Budget transparency and fiscal performance: Do open budgets matter?

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  • Sedmihradská, Lucie
  • Haas, Jakub

Abstract

Existing published research of the relationship between budget transparency and fiscal performance confirms the expectations that higher budget transparency is associated with smaller budget deficits and lower public debt. However, our previous research did not bring such clear results and raised a fundamental question: Why should greater transparency improve fiscal performance? The objective of the proposed paper is to evaluate the relationship between budget transparency and fiscal performance. Based on the literature review we have identified three channels through which increased transparency may limit excessive public expenditures resulting in budget deficit and public debt: (1) reduce fiscal illusion, (2) decrease information asymmetry between politicians and voters which may improve accountability and increase political competition, and (3) strengthen the enforcement of fiscal rules. The results of statistical analysis (conditional means analysis for 2008 and correlation and regression analysis for 2003 to 2009) did not prove any significant negative relationship between budget transparency, measured by the Open Budget Index, and budget deficit or public debt.

Suggested Citation

  • Sedmihradská, Lucie & Haas, Jakub, 2012. "Budget transparency and fiscal performance: Do open budgets matter?," MPRA Paper 42260, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:42260
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    1. Alberto F. Alesina & Roberto Perotti, 1999. "Budget Deficits and Budget Institutions," NBER Chapters, in: Fiscal Institutions and Fiscal Performance, pages 13-36, National Bureau of Economic Research, Inc.
    2. Isabelle Joumard & Per Mathis Kongsrud & Young-Sook Nam & Robert Price, 2004. "Enhancing the Cost Effectiveness of Public Spending: Experience in OECD Countries," OECD Economic Studies, OECD Publishing, vol. 2003(2), pages 109-161.
    3. International Monetary Fund, 2005. "Fiscal Transparency and Economic Outcomes," IMF Working Papers 2005/225, International Monetary Fund.
    4. Dollery, Brian E & Worthington, Andrew C, 1996. "The Empirical Analysis of Fiscal Illusion," Journal of Economic Surveys, Wiley Blackwell, vol. 10(3), pages 261-297, September.
    5. Poterba, James M. & von Hagen, Jurgen (ed.), 1999. "Fiscal Institutions and Fiscal Performance," National Bureau of Economic Research Books, University of Chicago Press, edition 1, number 9780226676234.
    6. James M. Poterba & Jürgen von Hagen, 1999. "Fiscal Institutions and Fiscal Performance," NBER Books, National Bureau of Economic Research, Inc, number pote99-1.
    7. Alt, James E. & Lassen, David Dreyer, 2006. "Fiscal transparency, political parties, and debt in OECD countries," European Economic Review, Elsevier, vol. 50(6), pages 1403-1439, August.
    8. Mr. George Kopits & Mr. J. D. Craig, 1998. "Transparency in Government Operations," IMF Occasional Papers 1998/001, International Monetary Fund.
    9. Rose, Shanna, 2010. "Institutions and Fiscal Sustainability," National Tax Journal, National Tax Association;National Tax Journal, vol. 63(4), pages 807-837, December.
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    Cited by:

    1. Ana Monica Pop, 2018. "A Brief Analysis Of The Public Institutions Buget: Theoretical And Practical Approaches," JOURNAL STUDIA UNIVERSITATIS BABES-BOLYAI NEGOTIA, Babes-Bolyai University, Faculty of Business.
    2. Emna Trabelsi, 2022. "Does fiscal transparency matter for financial (in)stability? An empirical study on emerging and developing countries," Economics Bulletin, AccessEcon, vol. 42(3), pages 1598-1608.
    3. Remus Ionut Naghi & Gheorghen Preda & Anca Cristina Dragomir, 2018. "The Relationship Between Internal Market Orientation And Employee Job Satisfaction: The Case Of The Romanian Banking Sector," JOURNAL STUDIA UNIVERSITATIS BABES-BOLYAI NEGOTIA, Babes-Bolyai University, Faculty of Business.
    4. Emna Trabelsi, 2019. "Do independence and transparency matter for bank development? A new lookup on emerging and developing countries," Post-Print hal-02162780, HAL.
    5. Mourão Paulo Reis & Bronić Mihaela & Stanić Branko, 2023. "The Impact of Local Governments’ Budget Transparency on Debt in Croatia," South East European Journal of Economics and Business, Sciendo, vol. 18(2), pages 21-33, December.
    6. A. Abdulhakeem, Kilishi,, 2020. "Budget Transparency and Fiscal Performance: Lessons for Nigeria and Sri Lanka," Working Papers 5, Department of Economics, University of Ilorin.
    7. Francisco Cifuentes-Silva & Daniel Fernández-Álvarez & Jose Emilio Labra-Gayo, 2020. "National Budget as Linked Open Data: New Tools for Supporting the Sustainability of Public Finances," Sustainability, MDPI, vol. 12(11), pages 1-12, June.
    8. Fazlı YILDIZ, & Ersin Nail SAGDIC, & Guner TUNCER, 2017. "Budgetary Transparency, E-Government And Corruption: New Evidence From Panel Data Approach," EcoForum, "Stefan cel Mare" University of Suceava, Romania, Faculty of Economics and Public Administration - Economy, Business Administration and Tourism Department., vol. 6(1), pages 1-55, January.
    9. Erika Kulcsar & Tunde Csoma & Noemi Fulop & Noemi Szonda & Kinga-Izabella Timar & Dorottya Vitalyos, 2018. "Mass Communication And Female Shaping Power," JOURNAL STUDIA UNIVERSITATIS BABES-BOLYAI NEGOTIA, Babes-Bolyai University, Faculty of Business.

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    More about this item

    Keywords

    budget transparency; fiscal performance; Open Budget Index;
    All these keywords.

    JEL classification:

    • J88 - Labor and Demographic Economics - - Labor Standards - - - Public Policy
    • H61 - Public Economics - - National Budget, Deficit, and Debt - - - Budget; Budget Systems

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