Stringency of balanced budget laws and transparency of budgeting process

Haizhen Mou and Maritza Lozano Man Hing

Public Budgeting & Finance, 2021, vol. 41, issue 2, 45-64

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.

Date: 2021
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