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How Do Fiscal Rules Shape Governments' Spending Behavior?

Author

Listed:
  • Cezara Vinturis

    (UCA - Université Clermont Auvergne, CERDI - Centre d'Études et de Recherches sur le Développement International - IRD - Institut de Recherche pour le Développement - CNRS - Centre National de la Recherche Scientifique - UCA - Université Clermont Auvergne)

Abstract
At odds with the large literature devoted to the fiscal discipline effects of fiscal rules, only few contributions investigate their impact on public spending. Using a large sample of 185 countries, estimations based on the entropy balancing method reveal the following causal effects: fiscal rules significantly reduce total public spending and public consumption, leave public investment mostly unaffected, and increase the public investment-to-public consumption ratio. Moreover, the type of fiscal rule and countries' level of economic development influence the way fiscal rules affect public spending. Lastly, fiscal rules' features seem to be a major driving force of the way governments change public spending-and, notably, total spending and public investment-in response to the adoption of fiscal rules. Consequently, the public investment decline during recent times should mostly be attributable to other things but fiscal rules (which sometimes even raise public investment); and increased attention should be given to the various fiscal rules' features, which may enforce or, on the contrary, weaken their fiscal discipline performances.

Suggested Citation

  • Cezara Vinturis, 2022. "How Do Fiscal Rules Shape Governments' Spending Behavior?," Post-Print hal-03839781, HAL.
    • Handle: RePEc:hal:journl:hal-03839781
    DOI: 10.1111/ecin.13120
    Note: View the original document on HAL open archive server: https://uca.hal.science/hal-03839781
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    File URL: https://uca.hal.science/hal-03839781/document
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    Citations

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    Cited by:

    1. Brändle, Thomas & Elsener, Marc, 2023. "Do fiscal rules matter? A survey on recent evidence," Working papers 2023/07, Faculty of Business and Economics - University of Basel.
    2. Sebastian Blesse & Florian Dorn & Max Lay, 2023. "Do Fiscal Rules Undermine Public Investments? A Review of Empirical Evidence," ifo Working Paper Series 393, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    3. Jocelyne Zoumenou, 2023. "On the impact of fiscal policy on inflation: The case of fiscal rules," EconomiX Working Papers 2023-21, University of Paris Nanterre, EconomiX.
    4. Sebastian Blesse & Florian Dorn & Max Lay, 2023. "Schwächen Fiskalregeln öffentliche Investitionen?," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 76(06), pages 22-28, June.
    5. Julia del Amo Valor & Marcos Martín Mateos & Diego Martínez López & Javier J. Pérez, 2023. "Is the European economic governance framework too “complex”? A critical discussion," Working Papers 2023-06, FEDEA.

    More about this item

    Keywords

    fiscal rules; public spending; public investment; fiscal rules' features; developed and developing countries JEL Codes: E62; H62;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus

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