Measuring the fiscal governance instruments: a synthetic index for EU countries

FRANEK, SLAWOMIR; POSTULA, MARTA

doi:10.1590/0101-31572021-3107

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Brazilian Journal of Political Economy

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Articles • Brazil. J. Polit. Econ. 41 (1) • Jan-Mar 2021 • https://doi.org/10.1590/0101-31572021-3107 copy

Measuring the fiscal governance instruments: a synthetic index for EU countries

Medindo os instrumentos de governança fiscal: um índice sintético para os países da União Europeia

Authorship SCIMAGO INSTITUTIONS RANKINGS

ABSTRACT

The aim of the paper is to examine the collective effect of fiscal governance instruments (i.e., fiscal rules, medium-term budgetary frameworks, independent fiscal institutions) on the fiscal outcomes of EU member states. The results of panel data model estimation for 28 EU countries for the period 2004-2016 confirm a statistically significant and positive impact of synthentic index for those instruments on the general government balance to GDP ratio. Additionally, an adjustment of the synthetic index was proposed, taking into account the degree of autonomy of independent fiscal institutions, and the link between medium-term budgetary frameworks and the annual budget.

KEYWORDS:
Fiscal governance; fiscal rules; medium-term budgetary frameworks; independent fiscal institutions

Variables	General government balance/GDP			Cyclically adjusted general government balance/GDP
Variables	(1)	(2)	(3)	(4)	(5)	(6)
GDP growth	0.31551***	0.30998***	0.3084 ***	0.07957**	0.07098**	0.06923**
GDP growth	(0.03849)	(0.036670)	(0.03821)	(0.034272)	(0.03207)	(0.03352)
GGdebt/GDP	-0.0604***	-0.05999***	-0.0614***	-0.03168*	-0.03185*	-0.03201*
GGdebt/GDP	(0.01696)	(0.0171)	(0.01837)	(0.01672)	(0.01707)	(0.01853)
Euro (dummy)	0.18678	0.30280	0.23442	-0.22330	-0.07105	-0.14942
Euro (dummy)	(0.50601)	(0.51736)	(0.52482)	(0.56181)	(0.5684)	(0.57075)
FRI	2.26518**			2.71139***
FRI	(1.0767)			(0.98938)
IFI (dummy)	0.77247			0.93435*
IFI (dummy)	(0.57978)			(0.49584)
MTBF	3.67633**			4.94351**
MTBF	(1.69248)			(2.05407)
SyntInd1		4.80579***			6.07065***
SyntInd1		(1.09251)			(1.18371)
SyntInd2			6.65057***			8.36654***
SyntInd2			(1.57514)			(1.64647)
Const	-3.1024***	-2.17360***	-2.3890***	-4.71687***	-3.4003***	-3.7565***
Const	(0.94168)	(0.74745)	(0.77014)	(1.17007)	(0.85262)	(0.90197)
FE/RE	RE	RE	RE	RE	RE	RE
R^2	0.3568	0.3611	0.3467	0.1985	0.2513	0.2334
Number of observations	364	364	364	364	364	364

No	Criterion name	Assessment scale for the criterion
1.	Interactions with the government during the budgetary process	The government is obligated to consult with the council - 1,
		The government may consult with the council - 0.5,
		No custom of the government consulting with the council - 0
2.	Interactions with the parliament during the budgetary process	The parliament is obligated to consult with the council - 1,
		The parliament may consult with the council - 0.5,
		No custom of the parliament consulting with the council - 0
3.	Government reaction to fiscal council forecasts	There is a legal obligation to use council forecasts - 1
		Custom dictates the use of council forecasts - 0.67
		The government uses its own forecasts, but is obligated to justify any deviation from forecasts published by the council - 0.33
		The government is completely free to use its own forecasts - 0
4.	Presence of politicians or civil servants among members of the fiscal council	No politicians or civil servants - 1
		No politicians - 0.5
		Politicians present - 0
5.	Appointment procedure	No participation of the government or parliament - 1
		No participation of the government - 0.5
		Government participation - 0
6.	Apolitical nature of members	Yes - 1
6.	Apolitical nature of members	No - 0
7.	Length of term in office	More than five years - 1
7.	Length of term in office	Up to five years - 0
8.	Institutional status	Outside government or parliamentary structures - 1
		Within parliamentary structures - 0.5
		A part of the government - 0
9.	Sources of financing	Nongovernmental - 1
9.	Sources of financing	Governmental - 0
10.	Access to information available to the government	Full - 1
		Privileged - 0.5
		No privileges - 0

Country/Name	SIFI	Rank	INIFI	Rank	Adjusted SIFI (average SIFI and INIFI)	Rank
ES-AIReF	0.764	2	0.850	1	0.807	1
IT-UPB	0.743	3	0.650	4	0.696	2
CY-FC	0.618	9	0.750	2	0.684	3
RO-FC	0.693	4	0.648	6	0.670	4
MT-FAC	0.657	6	0.634	7	0.646	5
AT-FISK	0.636	7	0.600	8	0.618	6
LV-FDC	0.450	15	0.750	2	0.600	7
PT-CFP	0.664	5	0.500	17	0.582	8
IE-IFAC	0.632	8	0.516	15	0.574	9
UK-OBR	0.771	1	0.367	23	0.569	10
NL-CPB	0.614	10	0.501	16	0.558	11
FR-HCFP	0.464	14	0.600	8	0.532	12
SK-CBR	0.446	16	0.600	8	0.523	13
HU-FC	0.364	22	0.650	4	0.507	14
DK-DORS	0.413	20	0.567	11	0.490	15
EL-FC	0.514	11	0.433	21	0.474	16
LT-NAO	0.507	13	0.416	22	0.462	17
FI-NAO	0.375	21	0.500	17	0.438	18
BG-FC	0.414	19	0.445	20	0.430	19
EE-FC	0.514	11	0.333	24	0.424	20
LU-CNFP	0.263	24	0.533	14	0.398	21
SI-IMAD	0.200	26	0.567	11	0.384	22
PL-SAO	0.200	26	0.550	13	0.375	23
SE-FPC	0.429	17	0.317	25	0.373	24
DE-BEIR	0.420	18	0.300	26	0.360	25
HR-CFP	0.250	25	0.450	19	0.350	26
BE-HCF	0.300	23	0.284	27	0.292	27
CZ	0.000	28	0.000	28	0.000	28

Country	“Raw” MTBF Index	Rank	Index of the link between MTBF and the annual budget	Rank	Adjusted MTBF Index	Rank
UK	0.707	6	1.000	1	0.853	1
ES	0.667	8	1.000	1	0.833	2
NL	0.640	13	1.000	1	0.820	3
SE	0.640	13	1.000	1	0.820	3
FI	0.587	19	1.000	1	0.793	5
CY	0.533	23	1.000	1	0.767	6
DK	0.493	24	1.000	1	0.747	7
EL	0.737	4	0.750	8	0.743	8
EE	0.567	21	0.750	8	0.658	9
BG	0.660	11	0.500	10	0.580	10
RO	0.645	12	0.500	10	0.573	11
FR	0.630	16	0.500	10	0.565	12
BE	0.615	17	0.500	10	0.558	13
AT	0.540	22	0.500	10	0.520	14
IT	0.744	3	0.250	15	0.497	15
MT	0.728	5	0.250	15	0.489	16
LT	0.697	8	0.250	15	0.473	17
LU	0.697	8	0.250	15	0.473	17
IE	0.633	15	0.250	15	0.442	19
PT	0.586	20	0.250	15	0.418	20
HU	0.428	27	0.250	15	0.339	21
CZ	0.317	28	0.250	15	0.283	22
LV	0.750	1	0.000	23	0.375	23
SK	0.750	1	0.000	23	0.375	23
SI	0.700	7	0.000	23	0.350	25
HR	0.600	18	0.000	23	0.300	26
DE	0.483	25	0.000	23	0.242	27
PL	0.433	26	0.000	23	0.217	28

Variables	General government balance/GDP (1)	Cyclically adjusted general government balance/GDP (2)
GDP growth	0.317493***	0.0789435**
GDP growth	(0.0381947)	(0.0345699)
GGdebt/GDP	-0.0569131***	-0.0296377 *
GGdebt/GDP	(0.0172913)	(0.0177037)
Euro (dummy)	0.4019375	0.0377193
Euro (dummy)	(0.5306721)	(0.5751342)
SyntIndAdj	6.278915***	8.332856***
SyntIndAdj	(1.628076)	(1.731203)
Const.	-2.572363	-3.929738
Const.	(0.7545545)	(0.8919349)
FE/RE	RE	RE
R^2	0.3556	0.2451
Number of observations	364	364

Centro de Economia Política Rua Araripina, 106, CEP 05603-030 São Paulo - SP, Tel. (55 11) 3816-6053 - São Paulo - SP - Brazil
E-mail: cecilia.heise@bjpe.org.br

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[TFN1] Robust standard error in parentheses, ***p<0.01, **p<0.05, ^*p<0.1.

[TFN2] Source: Own calculation.