Budget Procedures and Fiscal Performance: Evidence from OECD Countries in the Wake of the Crisis

Abstract

We analyze whether performance budgeting, budget transparency and medium-term expenditure frameworks are associated with the predicted moderation in the increase in the public debt-to-GDP ratio in OECD countries between 2008 and 2014. We find these countries naturally separate into two groups with different fiscal trajectories, but there is considerable heterogeneity within both groups in their use of the procedures. Notably, Belgium, Hungary and Norway present good fiscal trajectories but low levels of budget procedure use. Here, insights from political economy contribute little as the three countries fail to adhere to most of the rules deemed necessary for fiscal discipline. However, they present several common features: decentralized decision-making; distinct organizational climate governing budget administration; and, heavy reliance on agencies/public-private bodies. A standard package for enhancing fiscal performance does not therefore seem to exist, rather countries selectively adopt budget procedures to match their resources and institutions.