{
  "title": "Do Fiscal Rules Cause Fiscal Discipline Over the Electoral Cycle?",
  "publication": "IMF Working Papers, December 27, 2019",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2019/12/27/do-fiscal-rules-cause-fiscal-discipline-over-the-electoral-cycle-48882",
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  "summary": "This paper estimates the causal effect of fiscal rules on political budget cycles in a sample of 67 developing countries over the period 1985–2007.",
  "sections": [
    {
      "heading": "Summary findings",
      "content": "- Sample: 67 developing countries over the period 1985–2007.\n- Main causal finding: In election years with fiscal rules in place, public consumption is reduced by 1.6 percentage point of GDP as compared to election years without these rules.\n- Effect magnitude: This impact is equivalent to a reduction by a third of the volatility of public consumption in the sample.\n- Effect heterogeneity: The effectiveness of fiscal rules depends on their type, their institutional design, whether they have been in place for a long time, and on the degree of competitiveness of elections."
    },
    {
      "heading": "Methodology",
      "content": "- Identification strategy: Exploits the geographical pattern in the adoption of fiscal rules to isolate an exogenous source of variation in the adoption of national fiscal rules.\n- Instrumental variable: Uses the number of other countries in a given subregion that have fiscal rules in place to predict the probability of having them at the country level, based on a diffusion argument.\n- Empirical focus: Political budget cycles and public consumption around election years."
    },
    {
      "heading": "Policy-relevant insights",
      "content": "- Fiscal rules can causally reduce politically driven increases in public consumption in election years.\n- Design features and longevity matter: type of rule, institutional design, and how long a rule has been in place influence effectiveness.\n- Political context matters: greater competitiveness of elections alters the impact of fiscal rules on election-year fiscal outcomes."
    },
    {
      "heading": "Metadata and classification",
      "content": "- Subjects: Budget planning and preparation; Expenditure; Fiscal policy; Fiscal rules; Government asset and liability management; Public financial management (PFM).\n- Keywords: balanced budget rule; baseline result; Budget planning and preparation; budgetary outcome; Developing Countries; Election; election index; election year; elections data; expenditure rule; Fiscal Discipline; Fiscal Rules; Global; Government asset and liability management; low income; OLS estimate; Political Budget Cycles; right wing; WP.\n- Publication details:\n  - Pages: 36\n  - Volume: 2019\n  - Issue: 291\n  - Series: Working Paper No. 2019/291\n  - DOI: https://doi.org/10.5089/9781513523736.001\n  - Stock No: WPIEA2019291\n  - ISBN: 9781513523736\n  - ISSN: 1018-5941\n\nSource: IMF Working Paper \"Do Fiscal Rules Cause Fiscal Discipline Over the Electoral Cycle?\" by Kodjovi M. Eklou and Marcelin Joanis, December 27, 2019.\n\n---\n\n Content in this bundle\n\n- Working Paper\n  - Working Paper (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Working Paper (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2019/12/27/do-fiscal-rules-cause-fiscal-discipline-over-the-electoral-cycle-48882"
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    "Authors: Kodjovi M. Eklou, Marcelin Joanis",
    "Published: December 27, 2019",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781513523736.001",
    "Sample: 67 developing countries over the period 1985–2007.",
    "Main causal finding: In election years with fiscal rules in place, public consumption is reduced by 1.6 percentage point of GDP as compared to election years without these rules.",
    "Effect magnitude: This impact is equivalent to a reduction by a third of the volatility of public consumption in the sample.",
    "Effect heterogeneity: The effectiveness of fiscal rules depends on their type, their institutional design, whether they have been in place for a long time, and on the degree of competitiveness of elections.",
    "Identification strategy: Exploits the geographical pattern in the adoption of fiscal rules to isolate an exogenous source of variation in the adoption of national fiscal rules.",
    "Instrumental variable: Uses the number of other countries in a given subregion that have fiscal rules in place to predict the probability of having them at the country level, based on a diffusion argument.",
    "Empirical focus: Political budget cycles and public consumption around election years.",
    "Fiscal rules can causally reduce politically driven increases in public consumption in election years.",
    "Design features and longevity matter: type of rule, institutional design, and how long a rule has been in place influence effectiveness.",
    "Political context matters: greater competitiveness of elections alters the impact of fiscal rules on election-year fiscal outcomes.",
    "Subjects: Budget planning and preparation; Expenditure; Fiscal policy; Fiscal rules; Government asset and liability management; Public financial management (PFM).",
    "Keywords: balanced budget rule; baseline result; Budget planning and preparation; budgetary outcome; Developing Countries; Election; election index; election year; elections data; expenditure rule; Fiscal Discipline; Fiscal Rules; Global; Government asset and liability management; low income; OLS estimate; Political Budget Cycles; right wing; WP.",
    "Publication details:",
    "**Working Paper**"
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