Planning to cheat: EU fiscal policy in real time

Beetsma, Roel; Giuliodori, Massimo; Wierts, Peter

doi:10.1111/j.1468-0327.2009.00230.x

Cited by 140 publications

(152 citation statements)

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“…The existing literature has investigated the determinants of stock-flow adjustments in a cross country setting (Campos, Jaimovich and Panizza, 2006) and examined to what extent persistent discrepancies between annual changes in debt and budget deficits in Europe can be explained by accounting stratagems related to budget balance rules (Beetsma, Giuliodori, and Wierts, 2009;Von Hagen and Wolff, 2006). The present study is the first to focus on the relationship between stock-flow adjustments and fiscal transparency in a cross-country setting.…”

Section: Introductionmentioning

confidence: 99%

Stock-Flow Adjustments and Fiscal Transparency: A Cross-Country Comparison

Weber

2012

IMF Working Papers

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Over the past three decades, large and persistent discrepancies between the annual change in public debt and the budget deficit, so-called stock-flow adjustments, were a prominent feature of debt dynamics in many economies. The aim of this paper is to investigate the underlying determinants of such discrepancies and their relationship with fiscal transparency using data for 163 countries. Results show that such discrepancies can only be partly explained by balance sheet effects and the realization of contingent liabilities and that significant differences exist in average stock-flow adjustments across countries reflecting country-specific factors. The more fiscally transparent the country, the smaller these tend to be. The contribution of stock-flow adjustments to increases in debt is likewise smaller in countries with above average fiscal transparency. This may not be coincidental, as a lack of fiscal transparency may make it easier for governments to engage in deceptive fiscal stratagems. JEL Classification Numbers: H60, H63, F34

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Section: Introductionmentioning

confidence: 99%

Stock-Flow Adjustments and Fiscal Transparency: A Cross-Country Comparison

Weber

2012

IMF Working Papers

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“…Von Hagen and Wolff (2006, p. 3270) arrive at the conclusion that governments "systematically use stock-flow adjustments to lower deficits." European governments particularly engaged in creative accounting to hide borrowing after the introduction of the Stability and Growth Path (SGP) in 1998 (see, e.g., von , Beetsma et al 2009. The SGP limits the debt-to-GDP ratio to 60% and the deficit to 3%, but the deficit limit receives more attention.…”

Section: Prior Studies and Research Frameworkmentioning

confidence: 99%

Creative accounting and electoral motives: Evidence from OECD countries

Reischmann

2016

Journal of Comparative Economics

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may AbstractUsing an unbalanced panel of 27 OECD countries over the period 1970-2011, I examine whether electoral motives influenced creative accounting. Governments engage in "below-the-line" operations, such as transactions in financial assets, that do not show up in the deficit figures but give rise to changes in debt. I use the difference between the change in public debt and the deficit (stock-flow adjustment) to measure creative accounting. The results suggest that governments strategically engaged in creative accounting before regular elections so as to sugarcoat the budget balance. I also provide an overview of government interventions that gave rise to large stock-flow adjustments.JEL Code: C23, D72, E62,H61, H62, H63, P16.

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“…Similarly, Beetsma et al (2009) find that realized budget balances among SGP countries on average fall short of official ex ante plans. Marinheiro (2010) adds another complete business cycle to the data under the SGP, and again finds that the forecasts of European fiscal authorities are systematically too optimistic.…”

Section: Research On Official Fiscal Forecastingmentioning

confidence: 99%

Over-optimistic official forecasts and fiscal rules in the eurozone

Frankel

Schreger

2013

Rev World Econ

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Eurozone members are supposedly constrained by the fiscal caps of the Stability and Growth Pact. Yet ever since the birth of the euro, members have postponed painful adjustment. Wishful thinking has played an important role in this failure. We find that governments' forecasts are biased in the optimistic direction, especially during booms. Eurozone governments are especially over-optimistic when the budget deficit is over the 3% cap at the time the forecasts are made. Those exceeding this cap systematically but falsely forecast a rapid future improvement. The new fiscal compact among the euro countries is supposed to make budget rules more binding by putting them into laws and constitutions at the national level. But biased forecasts can defeat budget rules. What is the record in Europe with national rules? The bias is less among eurozone countries that have adopted certain rules at the national level, particularly creating an independent fiscal institution that provides independent forecasts. JEL classification numbers: E62, H50

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Planning to cheat: EU fiscal policy in real time

Cited by 140 publications

References 41 publications

Stock-Flow Adjustments and Fiscal Transparency: A Cross-Country Comparison

Stock-Flow Adjustments and Fiscal Transparency: A Cross-Country Comparison

Creative accounting and electoral motives: Evidence from OECD countries

Over-optimistic official forecasts and fiscal rules in the eurozone

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