Can fiscal transparency mitigate political budget cycles?

Hyewon Kang ()
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Hyewon Kang: Florida International University

Public Choice, 2025, vol. 202, issue 1, No 7, 166 pages

Abstract: Abstract This study investigates the impact of fiscal transparency on the political budget cycle (PBC) using U.S. State government data from 1991 to 2018. Employing a dynamic panel model, we test whether fiscal transparency mitigates PBC and influences expenditure composition in election years. A fiscal transparency index is constructed, encompassing the comprehensiveness of budget documents, legislature oversight, and the public availability of online financial information. Results indicate that fiscal transparency mitigates the PBC effects on total expenditure. Additionally, our results suggest a shift in expenditure composition from welfare to health and police spending during election years, supporting the PBC models’ hypothesis that incumbents prioritize visible spending. This study contributes to the conditional PBC literature by shedding light on the role of fiscal transparency.

Keywords: Political budget cycles; Fiscal transparency; Balanced budget requirements; Tax and expenditure limits (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:kap:pubcho:v:202:y:2025:i:1:d:10.1007_s11127-024-01174-0

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DOI: 10.1007/s11127-024-01174-0

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