A New Measure of Fiscal Transparency

The disclosure of fiscal and economic forecasts represents an increasingly important pillar of government transparency. Yet, a measure of transparency in fiscal and economic forecasts is presently missing. This article exploits the institutional features of the European Union’s (EU) Stability and Growth Pact (SGP) to construct a longitudinal, cross-country measure of transparency in government forecasts and to investigate its characteristics and drivers. The analysis reveals that governments are selective vis-à-vis the kind of forecasts they disclose: fiscal and economic flows are forecasted more frequently than fiscal stocks and assumptions. In addition, governments are relatively more willing to disclose short-term as opposed to medium-term forecasts. Finally, transparency is largely a function of political dynamics. Strikingly – given that the sample includes EU countries – the evidence indicates that variation in the degree of democracy is an important determinant of transparency.