Stringency of balanced budget laws and transparency of budgeting process. (4th January 2021)

• Record Type: Journal Article
• Authors: Mou, Haizhen; Lozano Man Hing, Maritza
• Is Part Of: Public budgeting & finance. Volume 41:Number 2(2021)
• Page Start: 45
• Page End: 64
• Publication Date: 2021-01-04
• Subjects: Budget -- United States -- Periodicals; Budget -- Periodicals; 352.4
• DOI: 10.1111/pbaf.12280
• Languages: English
• ISSNs: 0275-1100

Abstract

Abstract: We propose a framework to define and measure transparency in the budgeting process. We survey the main fiscal rules in the Canadian provinces from 1980 to 2018 and quantify them into a stringency index and a transparency index. Our findings show that more stringent balanced budget laws (BBLs) do not necessarily imply less transparency, while higher transparency requirements appear to reduce the effect of stringent BBLs on budget balance, possibly because transparency rules deter creative accounting. This study provides insights into the role of various fiscal rules in fiscal governance. Applications for Practice: A stricter requirement on budget balance is not necessarily associated with a lower transparency standard for the budgeting process. A higher transparency standard reduces the effect of a stringent balanced budget law on the budget balance. A transparent budgeting process is as important for achieving fiscal goals as stringent fiscal targets are.