Good, Bad or Ugly? On the Effects of Fiscal Rules with Creative Accounting

By G. Milesi-Ferretti. Social Science Research Network, 2000

419 citations recorded by the source corpus.

Do fiscal rules likely lead to fiscal adjustment, or do they encourage the use of ‘creative accounting’? This question is studied with a model in which fiscal rules are imposed on ‘measured’ fiscal variables, which can differ from ‘true’ variables because there is a margin for creative accounting. The probability of detecting creative accounting depends on its size and the transparency of the budget. The model studies the effects on fiscal policy of different rules, separating structural from cyclical effects, and examines how these effects depend on the underlying fiscal distortion and on the degree of transparency of the budget.

Subfields: Economics and Econometrics, Political Science and International Relations

View Paper: https://www.semanticscholar.org/paper/e2304b2dabbea78ab5208969fd4cdc2211d1bc55

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Citations in the corpus

Fool the Markets? Creative Accounting, Fiscal Transparency and Sovereign Risk Premia (2006, neutral): “This might increase the incentive of governments to hide away deficits by reverting to window-dressing or shifting fiscal expenditures off the budget (Milesi-Ferretti 2003).”
The Political Economy of Budget Deficits (2007, neutral): “Finally, a related strand in the literature suggests that budgetary institutions are paramount in determining fiscal policy outcomes (Alesina and Perotti, 1996a, 1996b; Alesina et al., 1999; Alt and Lassen, 2006; Eichengreen et al., 1999; Hahm et al., 1996; Kirchgassner, 2001; Milesi-Ferretti, 2003;”
Public-Private Partnerships and Government Spending Limits (2008, background): “…Bassetto and Sargent (2005), Beetsma and Uhlig (1999), Blanchard and Giavazzi (2004), Calmfors (2005), Inman and Rubinfeld (1997), Koen and van den Noord (2005), and Milesi-Ferretti (2000) for further discussion of the proper control of public deficits and borrowing. and government spending limits.”
Do Eurozone Countries Cheat with Their Budget Deficit Forecasts (2006, neutral): “The SGP therefore creates incentives for “unobservable fiscal effort” (Beetsma and Jensen 2003) of a malign nature, “creative accounting” (Milesi-Ferretti 2003) or plain cheating with budget deficit forecasts prior to elections (Strauch et al 2004).”
Fiscal institutions, fiscal policy and sovereign risk premia in EMU (2008, neutral): “14, 60431 Frankfurt, Germany e-mail: guntram.wolff@gmx.de ing to non-restricted items (e.g., von Hagen 1991; Bunch 1991; Kiewiet and Szakaly 1996; Dafflon and Rossi 1999; Milesi-Ferretti 2003, and von Hagen and Wolff 2006).”
Second-Generation Fiscal Rules; Balancing Simplicity, Flexibility, and Enforceability (2018, background): “Third, if adopted without sufficient political buy-in or a solid public financial management system, rules can also reduce transparency by encouraging creative accounting or off-budget operations (Milesi-Ferretti 2003).”
What Do Deficits Tell Us About Debt? Empirical Evidence on Creative Accounting with Fiscal Rules in the EU (2006, methodology): “In this paper we extend this line of research and test the model by Milesi-Ferretti (2003). In particular, we document stock-flow adjustments in the European Union, which are computed as the annual changes in debt levels minus the annual budget deficits. Positive stock-flow adjustments imply that th”
Why is Fiscal Policy Often Procyclical (2008, positive): “Here we cope with this problem as suggested in recent work by Jaimovich and Panizza (2007) and by Galí and Perotti (2003)—namely, we estimate β i by instrumental variables, instrumenting the output gap of country i with the output gap of the region of country i (excluding country i itself).”