Effects of fiscal transparency on inflation and inflation expectations: Empirical evidence from developed and developing countries

Gabriel Montes and Luiza Leitão da Cunha Lima

The Quarterly Review of Economics and Finance, 2018, vol. 70, issue C, 26-37

Abstract: Based on the arguments that a more transparent fiscal system provides policymakers with incentives to adopt better policies, in this study, we assess whether fiscal transparency affects inflation, inflation volatility, inflation expectations and expected inflation volatility. We analyze the efforts made by 82 countries in terms of increasing fiscal transparency and, based on panel data methodology, we estimate the effects of fiscal transparency on inflation and inflation expectations, as well as on inflation volatility and inflation expectations volatility. Our study is the first to present this empirical evidence, representing a contribution to the literature. The findings suggest that countries with higher levels of fiscal transparency tend to have lower inflation rates and lower inflation volatility, as well as expectations of lower inflation and less volatility in inflation expectations. The results also suggest that fiscal transparency has a stronger effect on inflation in the sample containing inflation targeting developing countries.

Keywords: Fiscal transparency; Inflation; Inflation expectation; Volatility (search for similar items in EconPapers)
JEL-codes: E31 E62 H11 H30 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:quaeco:v:70:y:2018:i:c:p:26-37

DOI: 10.1016/j.qref.2018.06.002

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