Do Budget Institutions Matter? Fiscal Consolidation in the New EU Member States

Abstract

Carlos Mulas-Granados, Jorge Onrubia and Javier Salinas-Jiménez investigate the role played by fiscal institutions in the new EU member states that joined in 2004 and in 2007 in the period from 1993 to 2004. They find that budgetary institutions – whose main features are summed up with indices – have had a significant influence on fiscal outcomes. In particular, with respect to the mechanisms whereby institutions affect balances, they show that the executive role (and sometimes also the planning role) of the finance minister has been crucial for pursuing sound public finances. This confirms the importance of institutional arrangements that limit parliamentary changes to the budget.