Institutions, fiscal transparency and fiscal policy outcomes

We examine how institutions influence the government's decisions on reporting and revising its fiscal data, and reforming its accounting system into an accrual basis. The effect of accrual accounting adoption on fiscal policy outcomes is also studied. While the literature analyzes only developed countries, we construct the extensive panel data including less developed countries and show that institutions play a different role in fiscal policy decisions and outcomes between the developed and the less developed ones.;In Chapter 1, we investigate how the government reports and revises its fiscal data. We find that while rule of law, legislative electoral competition, financial openness and population enhance reporting the fiscal data, natural resource rents, executive electoral competition and cabinet size prevent it. Also, we suggest that GDP per capita, bureaucratic quality, a presidential regime, election in the next year and ethno-linguistic fractionalization make the government diminish the time lag of reporting. Recently, trends that the government opens a small deficit at first and revises it to a big deficit later have been found. We show that these revisions come from a bias of initially released fiscal data as well as new information after the initial release. Also, while the early-reporting government releases balance initially without a bias in the developed countries, the late-reporting government does in the less developed ones. Lastly, we discover that fiscal rules, administrative quality and inflation diminish revisions from a small to a big deficit, but responsiveness of the government to people expands them in the developed countries. However, only real GDP growth decreases them significantly in the less developed countries.;In Chapter 2, we study which factors determine accrual accounting adoption among governments. We find that wealth such as GDP per capita and democracy facilitate the adoption consistently in all countries. However, while political competition, common law tradition, spread of accrual accounting among other governments and rule of law enhance the adoption in the developed countries, bureaucratic quality, education and economic stability are the important factors to encourage it in the less developed countries.;In Chapter 3, we look into how the adoption of accrual accounting affects fiscal policy outcomes such as debt, balance and the discrepancy between a net increase of debt and a deficit that is a proxy for fiscal transparency. We discover that while the adoption diminishes debt in the developed countries, it expands them in the less developed ones. These effects become strong in highly-indebted countries. The adoption improves balance in the developed countries and worsens it in the less developed ones, which is significant only in the developed ones with big deficits. Also, it lessens the discrepancy significantly and improves fiscal transparency only in the less transparent developed countries.