Can Budget Institutions Counteract Political Indiscipline?

May 1, 2006

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Format: Chicago

Ashoka Mody, and Stefania Fabrizio. Can Budget Institutions Counteract Political Indiscipline?, (USA: International Monetary Fund, 2006) accessed November 22, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

The budget is an expression of political rather than economic priorities. We confirm this proposition for a group of new and potential members of the European Union, finding that politics dominates. The contemporary practice of democracy can increase budget deficits through not only ideological preferences but also more fragmented government coalitions and higher voter participation. Long-term structural forces, triggered by societal divisions and representative electoral rules, have more ambiguous implications but also appear to increase budget pressures, as others have also found. However, our most robust, and hopeful, finding is that budget institutions-mechanisms and rules of the budget process-that create checks and balances have significant value even when the politics is representative but undisciplined, and when long-term structural forces are unfavorable.

Subject: Budget planning and preparation, Expenditure, Fiscal policy, Fiscal stance, Labor, Public debt, Public financial management (PFM), Unemployment rate

Keywords: Baltics, Budget institutions, Budget planning and preparation, Central and Eastern Europe, Coalitional government, Eastern Europe, Electoral rules, Ethnic fractionalization, Finance minister, Fiscal policy, Fiscal stance, General government expenditure, Government fragmentation, Government ideology, Institutions index, Least squares, Political economy, Unemployment rate, Voter turnover, WP

Publication Details

Pages:

53
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2006/123
Stock No:

WPIEA2006123
ISBN:

9781451863833
ISSN:

1018-5941

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