THE POLITICAL ECONOMY OF BUDGET DEFICITS
Политическая экономия бюджетного дефицита
2007-09-14
SCID: 54.1/t5rmzsee
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budget deficitsfederalismfiscal budgeting institutionsfiscal sustainabilitymulticointegration approach
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Abstract (AI)
In Leachman et al. (2005) we use the multicointegration approach to test for sustainable fiscal budgeting processes in a stochastic setting in 15 industrialized countries. In this paper, we extend the analysis in order to rank these same countries as well as an additional three, according to the degree to which their budget processes are sustainable. Rankings are related to theories regarding the political economy of budget deficits. Evidence clearly indicates that fiscal performance is better where fiscal budgeting institutions are strong. Additionally, we find that in conjunction with fiscal strength, greater degrees of federalismpositivelyaffect intertemporal budget management.
Key Findings
1
Fiscal performance is clearly better in countries with stronger fiscal budgeting institutions.
2
Greater degrees of federalism positively affect intertemporal budget management when combined with strong fiscal institutions.
3
The analysis extends a multicointegration-based assessment of sustainable fiscal budgeting processes in a stochastic setting.
4
The study ranks 18 industrialized countries by the degree of sustainability of their fiscal budgeting processes.
Research Object
Fiscal budgeting processes in 18 industrialized countries
Research Subject
The sustainability and intertemporal management of budget deficits in relation to fiscal institutions and federalism
Publication Details
Publication Date
2007-09-14
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