The Analysis of Fiscal Illusion and Budgetary Policy in Selected Developing Countries Using Dynamic Panel Data

Mohammad Taghi Gilak Hakim Abadi (), Shahryar Zaroki () and Hosna Ezoji ()
Additional contact information
Mohammad Taghi Gilak Hakim Abadi: Associate Professor of Economics University of Mazandaran
Shahryar Zaroki: Assistant Professor of Economics University of Mazandaran
Hosna Ezoji: M.A. Student in Economics University of Mazandaran

Quarterly Journal of Applied Theories of Economics, 2019, vol. 6, issue 1, 21-50

Abstract: Fiscal illusion is one of the effective factors on government’s budget status. Fiscal illusion refers to misinterpretation of financial parameters and overestimation and underestimation of expenditure and tax liabilities that leads to bias in budgetary decision at all levels of the government. Therefore, fiscal illusion in taxpayers confronts the politicians and the decision makers with a structure of motivations that prompts the adoption of public spending (expenditure) plans and increases the size of the government and its expenditure. The aim of this research is to investigate the effect of fiscal illusion on budgetary policy in selected developing countries between 2000 and 2014. For this purpose, we used dynamic panel data and a System Generalized Method of Moments GMM estimator. The results showed that fiscal illusion had a positive effect on budget deficit. So that the effect of fiscal illusion on budget deficit in the oil exporting countries it is higher than other countries; in the countries with high budget deficit is higher than in the countries with low budget deficit; in the countries with high fiscal illusion is higher than in the countries with low fiscal illusion, and in the high income countries is higher than other countries. Inflation has a positive effect and exchange rate as well as the degree of trade openness has negative effect on budget deficit

Keywords: Fiscal illusion; Budget deficit; Government policy; Dynamic panel data (search for similar items in EconPapers)
JEL-codes: C33 E62 O38 (search for similar items in EconPapers)
Date: 2019
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://ecoj.tabrizu.ac.ir/article_8103_9eb8eabc98be7b10bf64ac93f5a776e4.pdf Full text (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ris:qjatoe:0137

Access Statistics for this article

Quarterly Journal of Applied Theories of Economics is currently edited by Sakineh Sojoodi

More articles in Quarterly Journal of Applied Theories of Economics from Faculty of Economics, Management and Business, University of Tabriz Contact information at EDIRC.
Bibliographic data for series maintained by Sakineh Sojoodi ().