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Do fiscal councils affect the management of national public finances? A quasi-experimental study with panel data

No. 96 (2024-02-29)
  • Jesus Marcano
    Instituto de Estudios Superiores de Administración (IESA)
  • Karla Sánchez
  • José Manuel Puente
    Instituto de Estudios Superiores de Administración (IESA)
https://doi.org/10.13043/DYS.96.4

Abstract

The public deficit and debt levels of western countries have increased significantly in the last 30 years. In response to this, the implementation of fiscal councils has been gaining popularity as a measure to contain the deficit bias. These institutions seek to discourage a deficitarian managment of resources by providing information on the status of public finances, in order to increase citizen scrutiny and motivate a responsible government administration. This paper seeks to evaluate the effectiveness of these institutions by following an identification strategy based on synthetic control and difference-in-differences techniques. Although some of the resulting estimates indicate the existence of favorable impacts on the primary balance, most estimates show that the fiscal councils do not significantly influence fiscal management. Therefore, no conclusive evidence was found on the effectiveness of these institutions.

Keywords: fiscal administration, political economy, fiscal institutions, difference in differences, synthetic control

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