Premium
The effect of fiscal system reform on fiscal policy outcomes
Author(s) -
Lee Sangmok,
Esfahani Hadi Salehi
Publication year - 2020
Publication title -
scottish journal of political economy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.4
H-Index - 46
eISSN - 1467-9485
pISSN - 0036-9292
DOI - 10.1111/sjpe.12230
Subject(s) - transparency (behavior) , economics , debt , accrual , balance (ability) , fiscal policy , developing country , developed country , western hemisphere , monetary economics , macroeconomics , international economics , accounting , economic growth , medicine , population , demography , earnings , sociology , political science , law , physical medicine and rehabilitation
We investigate how reform in governmental accounting affects fiscal policy outcomes including debt, balance, and fiscal transparency. Since a change from cash to accrual accounting can be regarded as a natural experiment among governments, a fixed‐effects model is exploited. We discover that the change diminishes debt in developed countries, but expands it in less‐developed ones, with strong effects in highly indebted countries. The change improves balance in developed countries and worsens it in less‐developed countries, which is significant for developed countries with large deficits. Transparency is improved only in less transparent developed countries.