The Cold Austerity of Fiscal Rules

Can fiscal rules really avert incumbent's fiscal opportunism in election years? This work examines fiscal performances accross the Brazilian states in years of gubernatorial elections following the introduction of the Fiscal Responsibility Law. By using both quantitative and qualitative inquiry methods, the author analyzes fiscal data and fiscal management reports from a significant sample of states to disclose many cases of a lack of transparency and manipulations of fiscal data by officeholders as a means to circumvent FRL-imposed budget constraints. In general, these cases of creative accounting enabled politicians in office to simulate full compliance with fiscal rules, on one hand, and increase end-year fiscal deficits that were eventually conveyed to successor administrations, on the other. In the end our hypothesis is confirmed that, despite the rules, elections continue to negatively affect incumbents' fiscal behavior. Our conclusions are aligned with theoretical assumptions that a lack of both fiscal transparency and political independence of auditing institutions can lead to opportunist fiscal manipulations.

Autorentext

The author received a Ph.D. in political science from theFederal University of Pernambuco, Brazil, and a Ph.D. in landeconomy from the University of Cambridge, UK. He is currently asenior researcher at the Public Policy Research Center of FederalUniversity of Pernambuco. His research interests include fiscalpolicy and regional planning.

Klappentext

Can fiscal rules really avert incumbent's fiscal opportunism in election years? This work examines fiscal performances accross the Brazilian states in years of gubernatorial elections following the introduction of the Fiscal Responsibility Law. By using both quantitative and qualitative inquiry methods, the author analyzes fiscal data and fiscal management reports from a significant sample of states to disclose many cases of a lack of transparency and manipulations of fiscal data by officeholders as a means to circumvent FRL-imposed budget constraints. In general, these cases of creative accounting enabled politicians in office to simulate full compliance with fiscal rules, on one hand, and increase end-year fiscal deficits that were eventually conveyed to successor administrations, on the other. In the end our hypothesis is confirmed that, despite the rules, elections continue to negatively affect incumbents' fiscal behavior. Our conclusions are aligned with theoretical assumptions that a lack of both fiscal transparency and political independence of auditing institutions can lead to opportunist fiscal manipulations.