Multiyear Budgets and Fiscal Performance: Panel Data Evidence
43 Pages Posted: 30 Jun 2012 Last revised: 24 Dec 2013
Date Written: December 2013
In the last two decades more than 120 countries have adopted a multiyear budget process (Medium-Term Framework, or MTF) that enables the central government to set multiyear fiscal targets. This paper analyzes a newly-collected dataset of worldwide MTF adoptions during 1990-2008. It exploits within-country variation in adoption in a dynamic panel framework to estimate MTFs' impacts on aggregate as well as sectoral measures of fiscal performance. We find that on average multiyear budgeting improves budget balance by about 2 percentage points with more advanced MTF phases having a larger impact. Higher-phase MTFs also reduce health spending volatility, while only the top-phase MTF has a measurable impact on health sector technical efficiency.
Keywords: budget institutions, medium-term framework, fiscal discipline, health sector, technical efficiency, dynamic panel data analysis
JEL Classification: E62, H51, H62
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