Fiscal and Monetary Institutions in Central, Eastern and South-Eastern European Countries

Zsolt Darvas and Valentina Kostyleva ()
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Valentina Kostyleva: OECD Public Governance and Territorial Development Directorate

No 1102, Working Papers from Department of Mathematical Economics and Economic Analysis, Corvinus University of Budapest

Abstract: This paper studies the role of fiscal and monetary institutions in macroeconomic stability and budgetary control in central, eastern and south-eastern European countries (CESEE) in comparison with other OECD countries. CESEE countries tend to grow faster and have more volatile output than non-CESEE OECD countries, which has implications for macroeconomic management: better fiscal and monetary institutions are needed to avoid pro-cyclical policies. The paper develops a Budgetary Discipline Index to assess whether good fiscal institutions underpin good fiscal outcomes. Even though most CESEE countries have low scores, the debt/GDP ratios declined before the crisis. This was largely the consequence of a very favourable relationship between the economic growth rate and the interest rate, but such a favourable relationship is not expected in the future. Econometric estimations confirm that better monetary institutions reduce macroeconomic volatility and that countries with better budgetary procedures have better fiscal outcomes. All these factors call for improved monetary institutions, stronger fiscal rules and better budgetary procedures in CESEE countries.

Keywords: CESEE countries; Budgetary Discipline Index; budget process; fiscal institutions; budgetary institutions; monetary institutions; macroeconomic stability; econometric analysis; budgetary procedures; fiscal outcomes; fiscal rules (search for similar items in EconPapers)
JEL-codes: E32 E50 H11 H60 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2011-04
New Economics Papers: this item is included in nep-cba, nep-eec, nep-fdg, nep-mac, nep-mon and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Fiscal and Monetary Institutions in Central, Eastern and South-Eastern European Countries (2011)
Working Paper: Fiscal and Monetary Institutions in Central, Eastern and South-Eastern European Countries (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:mkg:wpaper:1102

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