On the Macroeconomic Effects of Fiscal Reforms: Fiscal Rules and Public Expenditure Efficiency

Ablam Estel Apeti (), Bao-We-Wal Bambe () and Jean-Louis Combes
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Ablam Estel Apeti: LEO - Laboratoire d'Économie d'Orleans [2022-...] - UO - Université d'Orléans - UT - Université de Tours - UCA - Université Clermont Auvergne
Bao-We-Wal Bambe: LEO - Laboratoire d'Économie d'Orleans [2022-...] - UO - Université d'Orléans - UT - Université de Tours - UCA - Université Clermont Auvergne

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Abstract: We ask whether fiscal rules improve public expenditure efficiency. That is, after computing efficiency scores for a panel of 159 countries of all income levels over the period 1990-2017, we apply the entropy balancing method to assess the effect of fiscal rules on the scores obtained, thus mitigating selection bias. Evidence suggests that implementing a fiscal rule significantly increases expenditure efficiency, with economically significant effects. Robustness was checked using a range of economic and econometric tests. Moreover, we show that our findings are neither driven by a spurious trend, nor by confounding factors, nor are they confounded by the effects of other reforms such as inflation targeting, IMF programs or fiscal consolidation episodes. Finally, further analysis suggests that the effect of fiscal rules on public expenditure efficiency is subject to some heterogeneity, depending on the types of rules, their design, macroeconomic factors as well as time elapsed since the reform adoption.

Keywords: Fiscal rules; Public expenditure efficiency; Entropy balancing (search for similar items in EconPapers)
Date: 2023-01-04
Note: View the original document on HAL open archive server: https://hal.science/hal-03961062v1
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Working Paper: On the Macroeconomic Effects of Fiscal Reforms: Fiscal Rules and Public Expenditure Efficiency (2022)
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