Does Fiscal Oversight Matter?

30 Pages Posted: 4 Nov 2014

See all articles by Désirée I. Christofzik

Désirée I. Christofzik

German Council of Economic Experts

Sebastian G. Kessing

Wissenschaftszentrum Berlin fuer Sozialforschung (WZB) - Market Processes and Governance; CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Date Written: October 22, 2014

Abstract

A gradually introduced reform of local government accounting made it temporarily likely for municipalities in the German state of North Rhine-Westphalia to avoid the effective control of their budget by the authorities in charge with overseeing local government budgets and enforcing the existing fiscal rules. Using this arguably exogenous withdrawal of effective fiscal oversight we identify the effects of fiscal restraints and their enforcement on fiscal outcomes. We find that the withdrawal of oversight has a significant and sizeable effect on per capita debt of local governments that were previously constrained by fiscal oversight. Fiscal restraints are important, and oversight and enforcement are key issues for their success.

Keywords: fiscal oversight, fiscal rules, local government debt

JEL Classification: H720, H740, R100

Suggested Citation

Christofzik, Désirée I. and Kessing, Sebastian G., Does Fiscal Oversight Matter? (October 22, 2014). CESifo Working Paper Series No. 5023, Available at SSRN: https://ssrn.com/abstract=2518410 or http://dx.doi.org/10.2139/ssrn.2518410

Désirée I. Christofzik

German Council of Economic Experts ( email )

Federal Statistical Office
Gustav-Stresemann-Ring 11
Wiesbaden, Hesse 65180
Germany

Sebastian G. Kessing (Contact Author)

Wissenschaftszentrum Berlin fuer Sozialforschung (WZB) - Market Processes and Governance ( email )

Reichpietschufer 50
D-10785 Berlin
Germany

CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Poschinger Str. 5
Munich, DE-81679
Germany

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