Examining the Evolution of Cross-National Fiscal Transparency

Abstract

Over the past two decades, global institutions, including the International Monetary Fund and the Organization for Economic Co-Operation and Development, have linked fiscal transparency to better governance, improved economic performance, and increased civic participation in government decision making. As a result, scholars and practitioners have attempted to systematically study the factors associated with a country’s fiscal transparency. At the international level, extant research employs cross-sectional analysis, which limits an understanding of how fiscal transparency evolves over time. We address this limitation by offering a cross-national longitudinal analysis of the factors associated with fiscal transparency as measured by the open budget index. Our study spans the years 2006 to 2012, using data on political, fiscal, information access, and economic conditions among 59 countries from nearly every part of the world. Using a first-difference panel regression and robust standard errors clustered by country, we found a positive association between economic recessions and fiscal transparency, indicating that fiscal crises may serve as opportunities for furthering transparency efforts. In addition, our study extends empirical documentation on the positive relationship between fiscal imbalance and fiscal transparency from the United States to the international arena, and provides support for a positive association between development aid and fiscal transparency. We also offer evidence for a negative association between democracy and fiscal transparency, which builds upon an emerging area of research suggesting selective release of government information by democratically elected officials.