Fiscal and Monetary Institutions in Central, Eastern and South-Eastern European Countries

Darvas, Zsolt and Kostyleva, Valentina (2011) Fiscal and Monetary Institutions in Central, Eastern and South-Eastern European Countries. Working Paper. Department of Mathematical Economics and Economic Analysis, Corvinus University of Budapest, Budapest.

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Published in: OECD Journal on Budgeting, Vol. 11(1)


This paper studies the role of fiscal and monetary institutions in macroeconomic stability and budgetary control in central, eastern and south-eastern European countries (CESEE) in comparison with other OECD countries. CESEE countries tend to grow faster and have more volatile output than non-CESEE OECD countries, which has implications for macroeconomic management: better fiscal and monetary institutions are needed to avoid pro-cyclical policies. The paper develops a Budgetary Discipline Index to assess whether good fiscal institutions underpin good fiscal outcomes. Even though most CESEE countries have low scores, the debt/GDP ratios declined before the crisis. This was largely the consequence of a very favourable relationship between the economic growth rate and the interest rate, but such a favourable relationship is not expected in the future. Econometric estimations confirm that better monetary institutions reduce macroeconomic volatility and that countries with better budgetary procedures have better fiscal outcomes. All these factors call for improved monetary institutions, stronger fiscal rules and better budgetary procedures in CESEE countries.

Item Type:Monograph (Working Paper)
Series Name:Working Papers, 2011/2
Uncontrolled Keywords:CESEE countries, Budgetary Discipline Index, budget process, fiscal institutions, budgetary institutions, monetary institutions, macroeconomic stability, econometric analysis, budgetary procedures, fiscal outcomes, fiscal rules, JEL codes: E32, E50, H11, H60
Divisions:Faculty of Economics > Department of Mathematical Economics and Economic Analyses
Subjects:Economic policy
ID Code:533
Deposited By: Ádám Hoffmann
Deposited On:27 Feb 2012 13:21
Last Modified:18 Oct 2021 08:44

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