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Fiscal governance in the Western Balkans: An analysis of fiscal rules, fiscal councils, and medium-term budgetary frameworks

Author

Listed:
  • Philipp Heimberger

    (The Vienna Institute for International Economic Studies, wiiw)

  • Branimir Jovanović

    (The Vienna Institute for International Economic Studies, wiiw)

  • Sanja Madzarevic-Sujster
  • Tim Pionteck
  • Dragan Tevdovski

Abstract

This paper presents a detailed analysis of fiscal frameworks across the six Western Balkan economies utilizing a newly compiled dataset based on the European Commission’s Fiscal Governance Database. The analysis reveals that although all six Western Balkan countries have implemented some form of fiscal rule, these rules are generally less robust than those in EU member states in Central, Eastern, and Southeastern Europe. Independent fiscal councils are operational only in Serbia and North Macedonia, as well as in one entity in Bosnia and Herzegovina, while other Western Balkan economies are still in the process of planning or implementing similar bodies. Across the region, medium-term budgetary frameworks are largely indicative in nature. Statistical and econometric analysis indicates that fiscal rules and councils in the Western Balkans may have had positive effects on reducing deficits and maintaining sustainable public debt dynamics, but only sporadically and to a limited degree. The political-economy challenges facing economies in the region may be inhibiting the adoption of fiscal rules and impairing the operation of fiscal councils. An evaluation of recent changes to EU fiscal rules and their implications for the Western Balkans highlights the need to improve the technical and analytical capabilities of fiscal institutions, as the new rules could negatively affect public investment in the region unless spending can be prioritized effectively and supported by improvements in domestic revenue mobilization.

Suggested Citation

  • Philipp Heimberger & Branimir Jovanović & Sanja Madzarevic-Sujster & Tim Pionteck & Dragan Tevdovski, 2024. "Fiscal governance in the Western Balkans: An analysis of fiscal rules, fiscal councils, and medium-term budgetary frameworks," wiiw Research Reports 478, The Vienna Institute for International Economic Studies, wiiw.
  • Handle: RePEc:wii:rpaper:rr:478
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    References listed on IDEAS

    as
    1. Jonathan Portes & Simon Wren-Lewis, 2015. "Issues in the Design of Fiscal Policy Rules," Manchester School, University of Manchester, vol. 83, pages 56-86, September.
    2. Reuter, Wolf Heinrich, 2019. "When and why do countries break their national fiscal rules?," European Journal of Political Economy, Elsevier, vol. 57(C), pages 125-141.
    3. Gootjes, Bram & de Haan, Jakob, 2022. "Do fiscal rules need budget transparency to be effective?," European Journal of Political Economy, Elsevier, vol. 75(C).
    4. Larch, Martin & Orseau, Eloïse & van der Wielen, Wouter, 2021. "Do EU fiscal rules support or hinder counter-cyclical fiscal policy?," Journal of International Money and Finance, Elsevier, vol. 112(C).
    5. Heimberger Philipp & Welslau Lennard & Schütz Bernhard & Gechert Sebastian & Guarascio Dario & Zezza Francesco, 2024. "Debt Sustainability Analysis in Reformed EU Fiscal Rules: The Effect of Fiscal Consolidation on Growth and Public Debt Ratios," Intereconomics: Review of European Economic Policy, Sciendo, vol. 59(5), pages 276-283.
    6. Carolina Ulloa-Suarez & Oscar Valencia, 2022. "Do governments stick to their announced fiscal rules? A study of Latin American and the Caribbean countries," SciencePo Working papers Main hal-03994711, HAL.
    7. Kikoni,Edith & Madzarevic-Sujster,Sanja & Irwin,Tim & Jooste,Charl, 2019. "Fiscal Rules for the Western Balkans," Policy Research Working Paper Series 8990, The World Bank.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    fiscal governance; fiscal rules; fiscal councils; MTBF; Western Balkans;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents
    • H6 - Public Economics - - National Budget, Deficit, and Debt

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