 Fiscal rules and creative accounting: Evidence from Japanese municipalitiesHaruaki Hirota and Hideo Yunoue Journal of the Japanese and International Economies, 2022, vol. 63, issue C Abstract: This paper analyzes a new fiscal rule and creative accounting using stock-flow adjustments. Previous studies investigate creative accounting using country- or state-level data, although the definitions of creative accounting differ depending on the study. We contribute to the literature on creative accounting by using Japanese municipality data from FY2007 to FY2010, following von Hagen and Wolff (2006). We focus on stock-flow adjustments by considering the relationship between the increase in the change in debt stock and the decrease in the deficit to measure creative accounting. Our contribution is the finding that municipalities engage in stock-flow adjustments by increasing their expenditures and revenues through intergovernmental transfers, which represents creative accounting because it allows municipalities to delay improving their fiscal conditions. To evaluate a new fiscal rule, we should check not only the targeted indexes but also the untargeted indexes, which municipalities do not have an incentive to control. Keywords: Fiscal rule; Creative accounting; Stock-flow adjustments; Soft budget constraint; Difference-in-differences (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jjieco:v:63:y:2022:i:c:s0889158321000514 DOI: 10.1016/j.jjie.2021.101172 Access Statistics for this article Journal of the Japanese and International Economies is currently edited by Takeo Hoshi More articles in Journal of the Japanese and International Economies from Elsevier |
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