Measuring fiscal guidance transparency

Columbano, Claudio

doi:10.3326/pse.46.2.4.

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Measuring fiscal guidance transparency

Claudio Columbano*

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https://doi.org/10.3326/pse.46.2.4

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Table 1
Stability/Convergence Programmes (SCPs) by country

	Number of SCP
Country	Total	Original	Occasional	EU accession date
Austria	17	17	0	1/1/1995
Belgium	18	17	1	1/1/1957
Bulgaria	12	12	0	1/1/2007
Croatia	5	5	0	1/7/2013
Cyprus	12	11	1	1/5/2004
Czech Republic	15	15	0	1/5/2004
Denmark	17	17	0	1/1/1973
Estonia	15	15	0	1/5/2004
Finland	17	17	0	1/1/1995
France	17	17	0	1/1/1957
Germany	19	17	2	1/1/1957
Greece	11	10	1	1/1/1981
Hungary	16	15	1	1/5/2004
Ireland	18	17	1	1/1/1973
Italy	17	17	0	1/1/1957
Latvia	15	14	1	105/2004
Lithuania	15	15	0	1/5/2004
Luxembourg	18	17	1	1/1/1957
Malta	15	15	0	1/5/2004
Netherlands	19	16	3	1/1/1957
Poland	16	15	1	1/5/2004
Portugal	17	16	1	1/1/1986
Romania	12	12	0	1/1/2007
Slovakia	15	15	0	1/5/2004
Slovenia	15	15	0	1/5/2004
Spain	17	17	0	1/1/1986
Sweden	17	17	0	1/1/1995
UK	17	17	0	1/1/1973
Total	434	420	14

Note: This table reports the number of Stability/Convergence Programmes (SCP) published by the EU member states between 2001 and 2018. Columns 3 and 4 report the number of original and occasional SCPs, respectively. Column 5 lists the date of accession into the EU.

Table 2
Description of ad hoc Stability/Convergence Programmes

Country	Year	Description	Rationale
Belgium	2009	Restatement	Request from the Council of the EU
Cyprus	2009	Addendum with updated projections	Addendum following the EERP
Germany	2004	Revision	Revision following political negotiations
Germany	2009	Addendum with updated projections	Addendum following the EERP
Greece	2005	Revision	Revision following concerns related to budgetary statistics
Hungary	2006	Restatement	Request from the Council of the EU
Ireland	2009	Addendum with updated projections	Addendum following the EERP
Latvia	2009	Revision	Revision following economic downturn
Luxembourg	2009	Addendum with updated projections	Addendum following the EERP
Netherlands	2003	Revision	Revision following political negotiations
Netherlands	2008	Addendum with updated projections	Addendum following the EERP
Netherlands	2012	Restatement	Request from the Council of the EU
Poland	2008	Revision	Revision of the budgetary strategy
Portugal	2014	Voluntary Submission	Voluntary Submission of fiscal strategy

Note: This table reports the rationale for the publication of the occasional SCPs that contain forecasts. In column 2 the year of publication of ad hoc SCPs is provided. Column 3 describes the nature of the occasional SCPs. Column 4 provides a brief indication of the rationale for the publication of the occasional SCP. EERP stands for European Economic Recovery Plan.

Table 5
Summary statistics of items included in the dataset

Category	#	Item name	N	Mean	St. dev.
Economic outlook Economic outlook Economic outlook Economic outlook Economic outlook Economic outlook Economic outlook Economic outlook Economic outlook Economic outlook Economic outlook Economic outlook Economic outlook Economic outlook Economic outlook Economic outlook Economic outlook Economic outlook Economic outlook Economic outlook Economic outlook Economic outlook Economic outlook Economic outlook Economic outlook Economic outlook Economic outlook Economic outlook Economic outlook Economic outlook Economic outlook Economic outlook Economic outlook Economic outlook Economic outlook	1	Real GDP	1674	0.97	0.16
	2	Nominal GDP	1674	0.94	0.24
	3	GDP deflator	1674	0.96	0.20
	4	Private consumption expenditure	1674	0.95	0.21
	5	Government consumption expenditure	1674	0.97	0.18
	6	Gross Fixed Capital Formation	1674	0.95	0.22
	7	Inventory and valuable	1674	0.93	0.26
	8	Exports	1674	0.95	0.22
	9	Imports	1674	0.95	0.22
	10	Final domestic demand	1674	0.95	0.22
	11	External balance	1674	0.96	0.20
	12	Private consumption deflator	1363	0.94	0.23
	13	Public consumption deflator	1363	0.88	0.33
	14	Investment deflator	1363	0.88	0.33
	15	Export deflator	1363	0.96	0.19
	16	Import deflator	1363	0.96	0.20
	17	Harmonized Consumer Price Inflation rate	311	0.50	0.50
	18	Employment growth	1674	0.94	0.24
	19	Labour productivity growth	1674	0.90	0.29
	20	Employment hours worked	1363	0.59	0.49
	21	Unemployment rate	1363	0.91	0.28
	22	Labour productivity per hour	1363	0.57	0.49
	23	Compensation of employees	1363	0.93	0.26
	24	Compensation per employee	931	0.93	0.25
	25	Balance of goods and services	1363	0.83	0.38
	26	Balance of income flows	1363	0.79	0.40
	27	Capital account	1363	0.72	0.45
	28	Net lending - Rest of the World	1363	0.83	0.37
	29	Net lending – Private sector	1363	0.69	0.46
	30	Statistical discrepancy	1363	0.36	0.48
	31	Potential GDP	1674	0.87	0.34
	32	Output gap	1674	0.93	0.25
	33	Potential GDP – labour	1363	0.68	0.47
	34	Potential GDP – capital	1363	0.68	0.47
	35	Potential GDP – productivity	1363	0.68	0.47
Fiscal outlook Fiscal outlook Fiscal outlook Fiscal outlook Fiscal outlook Fiscal outlook Fiscal outlook Fiscal outlook Fiscal outlook Fiscal outlook Fiscal outlook Fiscal outlook Fiscal outlook Fiscal outlook Fiscal outlook Fiscal outlook Fiscal outlook Fiscal outlook Fiscal outlook Fiscal outlook Fiscal outlook Fiscal outlook Fiscal outlook Fiscal outlook Fiscal outlook Fiscal outlook Fiscal outlook Fiscal outlook Fiscal outlook Fiscal outlook Fiscal outlook Fiscal outlook Fiscal outlook Fiscal outlook Fiscal outlook Fiscal outlook Fiscal outlook Fiscal outlook Fiscal outlook Fiscal outlook Fiscal outlook Fiscal outlook Fiscal outlook Fiscal outlook Fiscal outlook Fiscal outlook Fiscal outlook	36	Net lending – general government	1674	1.00	0.07
	37	Net lending – central government	1674	0.94	0.23
	38	Net lending – local governments	1674	0.90	0.30
	39	Net lending – social security funds	1674	0.88	0.33
	40	Total revenues	1674	0.97	0.17
	41	Total expenditures	1674	0.98	0.15
	42	Net interest payments	1674	0.97	0.17
	43	Primary balance	1674	0.99	0.09
	44	Taxes	1674	0.90	0.30
	45	Taxes on production and imports	1363	0.95	0.21
	46	Taxes on income and wealth	1363	0.94	0.24
	47	Capital taxes	1363	0.90	0.30
	48	Property income	1363	0.92	0.27
	49	p.m. Tax burden	1363	0.91	0.28
	50	Social contributions	1674	0.94	0.24
	51	Interest income	311	0.44	0.50
	52	Other revenues	1674	0.93	0.25
	53	Collective consumption	743	0.50	0.50
	54	Social transfers. in kind	1674	0.78	0.42
	55	Social transfers. not in kind	1674	0.84	0.37
	56	Interest expenditure	311	0.96	0.20
	57	p.m. FISIM	432	0.21	0.41
	58	Social payments	1363	0.94	0.23
	59	Of which: unemployment benefits	636	0.75	0.43
	60	Capital transfers	636	0.86	0.35
	61	Subsidies	1674	0.94	0.23
	62	Government Gross Fixed Capital Formation	1674	0.96	0.20
	63	Compensation of employees plus intermediate consumption	931	0.90	0.30
	64	Compensation of employees	931	0.90	0.31
	65	Intermediate consumption	931	0.90	0.31
	66	p.m. Government consumption	931	0.69	0.46
	67	p.m. Compensation of government employees	432	0.67	0.47
	68	Other expenditures	1674	0.93	0.26
	69	Cyclical budgetary component	1674	0.88	0.33
	70	Cyclically adjusted balance	1674	0.87	0.34
	71	Cyclically adjusted primary balance	1674	0.80	0.40
	72	Cyclical unemployment benefits	636	0.88	0.32
	73	One-off items	931	0.76	0.43
	74	Of which: one-off expenditure	108	0.41	0.49
	75	Of which: one-off revenue	108	0.41	0.49
	76	Structural balance	931	0.93	0.26
	77	Total revenues at unchanged policies	636	0.95	0.21
	78	Total expenditures at unchanged policies	636	0.75	0.43
	79	Effect of discretionary revenues	636	0.89	0.31
	80	Revenue increases mandated by law	636	0.54	0.50
	81	Expenditures on EU programmes	636	0.91	0.28
	82	Of which: investments on EU programmes	108	0.59	0.49
Debt outlook Debt outlook Debt outlook Debt outlook Debt outlook Debt outlook Debt outlook Debt outlook Debt outlook Debt outlook Debt outlook Debt outlook Debt outlook Debt outlook Debt outlook Debt outlook Debt outlook	83	Gross debt	1674	0.99	0.08
	84	Change in the debt ratio	1674	0.97	0.16
	85	Percentage of debt denominated in foreign currency	636	0.29	0.45
	86	Average debt maturity	636	0.15	0.36
	87	Primary balance	311	0.94	0.24
	88	Nominal GDP growth	311	0.91	0.28
	89	p.m. implicit interest	1674	0.91	0.29
	90	Liquid financial assets	1363	0.21	0.41
	91	Net financial debt	1363	0.21	0.40
	92	Debt amortization	636	0.33	0.47
	93	Stock-flow adjustments	1674	0.89	0.31
	94	Of which: privatization receipts	1674	0.33	0.47
	95	Of which: cash-accruals reconciliation	1363	0.32	0.47
	96	Of which: accumulation of financial assets	1363	0.34	0.47
	97	Of which: valuation effects	1363	0.29	0.45
	98	Public guarantees	636	0.10	0.30
	99	Of which: to financial sector	636	0.07	0.26
Assumptions Assumptions Assumptions Assumptions Assumptions Assumptions Assumptions Assumptions Assumptions Assumptions Assumptions Assumptions Assumptions Assumptions Assumptions Assumptions Assumptions Assumptions	100	Short term interest rates	1674	0.59	0.49
	101	Long term interest rates	1674	0.66	0.47
	102	USA Short term interest rates	311	0.15	0.36
	103	USA Long term interest rates	311	0.18	0.38
	104	USD EUR exchange rate	311	0.68	0.47
	105	Effective exchange rate: euro	311	0.10	0.30
	106	Effective exchange rate: EU	311	0.07	0.25
	107	Exchange rate – National Currency - Euro	311	0.27	0.45
	108	Real GDP: World	1674	0.67	0.47
	109	Real GDP: US	311	0.30	0.46
	110	Real GDP: Japan	311	0.24	0.43
	111	Real GDP: EU15	1674	0.70	0.46
	112	Real GDP: relevant markets	1674	0.65	0.48
	113	Import world volume	1674	0.55	0.50
	114	Import world prices	311	0.14	0.35
	115	Commodity prices	311	0.23	0.42
	116	Oil prices	1674	0.82	0.38
	117	Effective exchange rate	1363	0.59	0.49

Note: This table reports descriptive statistics of each item included in the dataset. The first column reports the category to which items are assigned. Column 2 includes the item number. Column 3 provides a short description of the item. Each item is coded as either present (1) or absent (0).

Table 8
Description and source of variables

Variable	Description	Source
FGT	The number of non-missing items in a SCP divided by the total number of SCP-specific required items.	Author's own elaboration on primary data collected from Stability/Convergence Programmes (SCP). See equation (1)
Government Strength	The percentage of seats in the legislative chamber(s) that are occupied by members loyal to the incumbent governing coalition	Database of Political Institutions 2021: variable name MAJ
Fragmentation of Parliament	The probability that two deputies picked at random from the legislature belong to different political parties	Database of Political Institutions 2021: variable name FRAC
Electoral Pressure	Negative one times the number of years left in the term of the government	Database of Political Institutions 2021: variable name YRCURNT
Democracy	The Polity 2 score	Polity IV database, variable polity2
GDP per capita	Natural logarithm of GDP per capita in constant 2010 U.S. dollars	World Bank Development Indicators, series NY.GDP.PCAP.KD
Debt	General Government Consolidated Gross Debt, divided by GDP at current market prices	Eurostat, series gov_10dd_edpt1
Budget Balance	General Government Net Lending/Net Borrowing, divided by GDP at current market prices	Eurostat, series gov_10dd_edpt1
Trade	The sum of exports and imports of goods services, divided by GDP at current market prices	Eurostat, series nama10_gdp
EU Funds	EU payments to member states, divided by GDP at current market prices	European Commission, DG Regional Policy at: https://cohesiondata.ec.europa.eu/Other/Historic-EU-payments-regionalised-and-modelled/tc55-7ysv
Euro adopter	1 if the country is a member of the euro area, 0 otherwise	European Central Bank

Note: This table presents the definition and source of variables used in the analysis.

Table 9
Pairwise correlations

Variables	(1)	(2)	(3)		(4)		(5)		(6)		(7)	(8)		(9)	(10)	(11)
(1) FGT	1.000

(2) Government Strength	-0.118	1.000
	0.000
(3) Fragmentation of Parliament	0.157	-0.008	1.000
	0.000	0.734
(4) Electoral Pressure	-0.012	0.037	0.007		1.000
	0.616	0.135	0.784
(5) Democracy	-0.128	-0.184	-0.224		0.022		1.000
	0.000	0.000	0.000		0.379
(6) GDP per capita	-0.314	-0.066	0.139		0.062		0.352		1.000
	0.000	0.007	0.000		0.011		0.000
(7) Debt	-0.033	0.001	-0.303		0.018		0.141		0.201		1.000
	0.191	0.969	0.000		0.467		0.000		0.000
(8) Budget Balance	-0.038	0.045	0.304		0.064		-0.039		0.226		-0.430	1.000
	0.136	0.078	0.000		0.011		0.127		0.000		0.000
(9) Trade	0.096	0.071	0.088		0.006		-0.016		0.162		-0.291	0.197		1.000
	0.000	0.004	0.000		0.796		0.512		0.000		0.000	0.000
(10) EU Funds	0.265	0.096	-0.102		-0.033		-0.201		-0.587		-0.133	-0.187		0.071	1.000
	0.000	0.000	0.000		0.195		0.000		0.000		0.000	0.000		0.005
(11) Euro adopter	0.134	-0.072	-0.003		-0.036		-0.188		-0.516		-0.413	0.034		-0.109	0.240	1.000
	0.000	0.003		0.907		0.138		0.000		0.000	0.000		0.177	0.000	0.000

Note: This table presents pairwise correlations of the variables used in the analysis. Variables are defined in table 8.

Table 10
Fiscal guidance transparency (FGT) depends on political dynamics

	(1)	(2)	(3)	(4)
Government strength	-0.42^*	-0.16⁺	-0.42^**	-0.16⁺
Government strength	[0.15]	[0.08]	[0.15]	[0.08]
Fragmentation of parliament	0.31⁺	-0.35^*	0.31⁺	-0.35^*
Fragmentation of parliament	[0.17]	[0.16]	[0.17]	[0.16]
Electoral pressure	0.44	0.30	0.44	0.30
Electoral pressure	[0.59]	[0.31]	[0.57]	[0.30]
Democracy	1.17	5.39	1.17	5.39⁺
Democracy	[1.96]	[3.35]	[1.90]	[3.17]
GDP per capita	-10.92^**	-8.77	-10.92^**	-8.77
GDP per capita	[3.92]	[9.89]	[3.82]	[9.24]
Debt	0.12⁺	-0.06	0.12⁺	-0.06
Debt	[0.06]	[0.08]	[0.06]	[0.08]
Budget balance	0.95⁺	0.28	0.95^*	0.28
Budget balance	[0.47]	[0.22]	[0.46]	[0.21]
Trade	0.04	-0.04	0.04	-0.04
Trade	[0.03]	[0.05]	[0.03]	[0.04]
EU funds	0.66	-0.96	0.66	-0.96
EU funds	[0.71]	[0.77]	[0.69]	[0.73]
Euro adopter	-1.36	3.54	-1.36	3.54
Euro adopter	[5.23]	[2.72]	[5.07]	[2.77]
Constant	157.53^***	147.29	157.53^***	147.29
Constant	[40.26]	[108.15]	[39.34]	[102.85]
Adj. R2	0.31	0.64	0.31	0.64
Country FE	No	Yes	No	Yes
Year FE	Yes	Yes	Yes	Yes
Horizon FE	Yes	Yes	Yes	Yes
Cluster	Country	Country	Country & Date	Country & Date

Note: This table reports estimates of OLS regressions of the FGT index on measures of economic wealth, financial pressures and political dynamics and fixed effects. All fixed effects are unreported for presentation purpose. Standard errors in brackets are clustered at the dimension indicated at the bottom of the table. Variables are defined in table 8.

+ p < 0.10, * p < 0.05, ** p < 0.01, *** p < 0.001.

Table 1

Stability/Convergence Programmes (SCPs) by country

DISPLAY Table

Table 2

Description of ad hoc Stability/Convergence Programmes

DISPLAY Table

Table 3

Differences in event dates

DISPLAY Table

Table 4

Distribution of fiscal plans by publication year, quarter, month, and day

DISPLAY Table

Table 5

Summary statistics of items included in the dataset

DISPLAY Table

Figure 1

Features of the fiscal guidance transparency index (FGT index)

DISPLAY Figure

Table 6

Summary statistics of the fiscal guidance transparency index

DISPLAY Table

Table 7

Transparency declines as the forecast horizon lengthens

DISPLAY Table

Table 8

Description and source of variables

DISPLAY Table

Table 9

Pairwise correlations

DISPLAY Table

Table 10

Fiscal guidance transparency (FGT) depends on political dynamics

DISPLAY Table

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