Do the personal characteristics of finance ministers affect changes in public debt?

Using a unique dataset of the personal characteristics of national finance ministers in Western Europe (1980–2010), I show that a finance minister’s experience affects the national debt-to-GDP ratio. The increase in the debt-to-GDP ratio is smaller if the finance minister stays in office for an additional year. This result is robust to the inclusion of the personal characteristics of prime ministers and a measure of political stability. However, the magnitude of the effect is sensitive to how finance ministers are selected in the econometric model when more than one minister holds office during a particular year. The estimation of interaction terms further reveals that experience particularly matters in election years or in times of negative GDP growth because an experienced finance minister has the power to restrict the usual increase in the debt-to-GDP ratio. In contrast, a finance minister’s educational background and ideological leaning have no significant impact on the debt-to-GDP ratio.     

Fiscal institutions, fiscal policy and sovereign risk premia in EMU

We investigate the effect of fiscal institutions such as the strength of the finance minister in the budget process and deficits on interest rate spreads of Eurozone countries. Deficits significantly increase risk premia measured by relative swap spreads. The effect of deficits is significantly lower under EMU. This effect partly results from neglecting the role of fiscal institutions. After controlling for institutional changes, fiscal policy remains a significant determinant of risk premia in EMU. Better institutions are connected with lower risk premia. Furthermore deficits matter less for risk premia in countries with better institutions. Markets acknowledge that better institutions reduce fiscal difficulties rendering the monitoring of annual developments less important.     

Does Direct Democracy Reduce Public Debt Evidence from Swiss Municipalities

Although some countries have managed toobtain balanced budgets or even budgetsurpluses in recent times, public debts ofmany OECD countries remain at high levels.Since structural reforms of public spendinghave only infrequently taken place in mostcountries, fiscal pressure will increaseagain in the future due to society's ageingand the accompanying increases in socialtransfer spending. Constitutionalrestrictions on debt levels and legal rulesof the budgetary process, such as a strongrole of the minister of finance, aresupposed to be helping against the debtbias inherent in political decision-makingprocedures. In addition to such top downbudgetary procedures, this paperinvestigates the impact of referendumapproval of budget deficits by the voterson the level of public debt in a crosssection of the 134 largest Swissmunicipalities in 1990.     

Fiscal Policy Learning from Crisis: Comparative Analysis of the Baltic Countries

The experience of a major crisis is often expected to lead to policy learning but the empirical evidence about this is limited. The goal of the paper is to explore comparatively whether the crisis of 2008–2010 has led to fiscal policy learning by civil servants in the three Baltic countries. Despite some differences in the crisis experience, the finance ministry officials in all three countries have identified the same lesson from the crisis: fiscal policy should be counter-cyclical and help to stabilize the economy. The paper also discusses how various factors have influenced policy learning, including the acknowledgment of failure, blame shifting, and analytical tractability.     

Do budgetary institutions mitigate the common pool problem? New empirical evidence for the EU

We analyze how budgetary institutions affect government budget deficits in member states of the European Union during 1984–2003 employing new indicators provided by Hallerberg et al. (2009). Using panel fixed effects models, we examine whether the impact of budgetary institutions on budget deficits is conditioned by political fragmentation (i.e., ideological differences among parties in government) and size fragmentation (i.e., the effective number of parties in government or the number of spending ministers). Our results suggest that strong budgetary institutions, no matter whether they are based on delegation to a strong minister of finance or on fiscal contracts, reduce the deficit bias in case of strong ideological fragmentation. In contrast, the impact of budgetary institutions is not conditioned by size fragmentation.     

Financing Transport Infrastructure: The Effects of Institutional Durability in French and American Policymaking

This article compares the finance of transportation infrastructure in France and the United States in order to test the concept of institutional durability as an intervening variable that can account for different patterns of industrial development. Institutional durability is defined as the degree to which the fiscal norms and principles established in agreements between government, industry, and financial investors go on to exert influence over subsequent attempts to reorder the allocation of collective economic burdens and benefits. Two historical episodes of infrastructure development, mid-19th century railroad construction and the creation of inter-city highways between the First and Second World Wars, will be evaluated to identify and differentiate the effect of institutional durability upon American and French transportation policy.
French infrastructure finance is shown to exhibit a limited institutional durability which has facilitated the historical adjustment of both rail and road infrastructure along convergent fiscal terms. US infrastructure development is seen to possess a much greater institutional durability which has encouraged the divergence of fiscal arrangements set up at different periods of time. The resulting accumulation of incompatible and often competitive arrangements appears to have locked the US into conflicting means of transport development that make a fiscally coherent transportation policy very difficult to achieve. No such institutional obstacle emerges in French transport policy where the terms of macroeconomic decision-making are seen to be integrated.     

Post‐ministerial occupation in advanced industrial democracies: Ambition,individual resources and institutional opportunity structures

The post‐office occupation of former cabinet members remains basically unexplored in both single‐case and comparative studies. Is being a minister just a career tout court, or does serving in executive office facilitate movement to other positions? This article sheds new light on this question by advancing the theoretical development and empirical understanding of the various types of post‐ministerial occupation. The analysis takes into account ex‐ministers’ ambition, political capital resources and the institutional opportunity structures that might well affect both ambition and individual resources. Additionally, given that access to executive office is profoundly gendered, the article addresses the central question of whether post‐ministerial occupations similarly present differential patterns for women and men. The empirical results of a cross‐national comparison of 23 advanced industrial democracies show that, for most departing ministers, serving in executive office is indeed a stepping stone to other positions. Post‐office trajectories are not only shaped by ex‐ministers’ political capital resources such as seniority, party office, policy expertise and type of portfolio held while in cabinet, but also by different institutional factors that present country‐specific combinations. Specifically, systemic variables shape the relevance of political capital resources and affect how ambition is constructed and towards which goals. Strong gendered post‐office patterns are not found, although some intriguing gender differences are observed.     

The Push and Pull of Ministerial Resignations in Germany, 1969–2005

When and why are cabinet ministers forced out of office? We argue that ministerial resignations cannot be understood as mechanistic consequences of serious personal or departmental errors as the classical responsibility hypothesis implies. Rather, they follow a systematic political logic. Cabinet ministers have to resign whenever the prime minister perceives the political costs of a minister staying in office to be higher than the benefits of keeping the status quo. We test this argument with resignation events in Germany in the period 1969 to 2005. Based on detailed data collection, we find 111 resignation events, i.e. serious public discussions about a cabinet minister's future, 14 of which ended in resignation. These data are analysed employing statistical as well as Qualitative Comparative Analysis based on Boolean algebra to detect patterns of ministerial resignations.     

Greek Everyman: Andreas Papandreou at 100

2019 marks 100 years since the birth of Andreas Papandreou, Greece's first socialist prime minister and an extraordinary figure of twentieth century European politics. Looking back, the central purpose of this article is to answer pivotal questions about Papandreou and his career. What have been the major turning points in his life? What were his main beliefs? What motivated him and his politics? What were his political priorities and methods? What did he want to achieve as prime minister? Why did he become so involved in foreign policy issues? What were his assets as prime minister? Did they outweigh his shortcomings as a politician and leader? Did power change him and how? What will be Papandreou's place in history?     

Organization and Reporting of Public Financial Accounts: Insights and Policy Implications from the Singapore Budget

This paper analyses the Singapore government budget's organization and reporting structure, and draws lessons and policy implications for improving public financial management practices. The paper finds that Singapore's fiscal marksmanship record has been poor with consistent underestimates of revenue and overestimates of expenditure. Second, subtle divergences from international reporting standards limit the information available and constrain the budget's analytical usefulness in international comparisons. Third, current reporting conventions of the budget fail to provide an adequate representation of the government's fiscal position. Fourth, revised estimates of budgetary balances in line with international reporting standards show a considerable increase in the fiscal space available. The policy implications of these findings are discussed, as well as some reporting changes which can help improve the fiscal marksmanship record, increase public sector transparency and accountability, and facilitate better quality discourse among all stakeholders on public financial management.     

Ukrainian Local Governments’ Finance on the Threshold of a New Millenium: Will Interbudgetary Reform Meet Public Needs?

Since independence, market–oriented reforms have been undertaken in Ukraine. Yet, intergovernmental relations are obsolete, remaining as they were in the Soviet time. In fact, Ukrainian subcentral governments have no significant discretion in revenues and expenditures. First, the article delivers an overview of the current system of intergovernmental finance in Ukraine. Second, the article reveals some negative trends in Ukrainian local governments' fiscal performance through the late 1990s that made a reform of intergovernmental fiscal arrangements timely. Third, the article analyzes recent reform steps as presented by the recent Budget Code, proposing policy options that could strengthen Ukrainian intergovernmental policy.     

Getting Dirty-Minded: Implementing Presidential Policy Agendas Administratively

With polarization in Congress persistent, with staggering issues and international threats facing the nation, and with fiscal stress an enduring fact of life, presidents have for decades turned to the tools of the administrative presidency to advance and implement their policy agendas. As the Barack Obama administration completed its first six months in office amid great challenges and hopes, the president was no exception in counting on his appointees to wield the tools of the administrative presidency to advance his protean policy agenda for America. This essay offers 10 research-based lessons for new appointees charged with advancing presidential agendas administratively to ponder as they do so.     

The political policy cycle: Presidential effort vs. presidential control

After disentangling presidential budget proposals from budgetary changes attributable to fluctuations in the economy and to congressional action, we find consistent evidence for a presidential macroeconomic policy cycle attuned to the elctoral cycle. Proposed budgets are more expansionary in election years than at other times. The Congress, however, also plays a significant role in determining fiscal outcomes. Its budgets are systematically related to those of the President and in general reinforce presidential efforts to respond to the electoral cycle. Although Presidents generally propose quite conservative budgets, their proposals are more expansionary in presidential election years than in other years. The Congress, which generally adopts an expansionary fiscal policy ratifies this proposed macroeconomic policy electoral cycle by adopting even more expansionary budgets in presidential election years than they do at other times.     

The political economy of local government financialization and the role of policy diffusion

By analyzing why English local governments have made extensive use of long-term market loans with embedded derivatives, this paper seeks to contribute to the growing literature on local government financialization. Using an original, large-N panel dataset for the period from 1998 to 2014, we show that the configuration of the local political economy is an important driver of financialization processes: a Labour Party majority as well as fiscal and economic stress make it more likely that councils adopt risky financial instruments. As the use of financial innovations has also diffused geographically, policy diffusion impacts local governments as well. Highlighting the conditional effect of finance sector power, which only increases the use of financial innovations in very large councils, as well as the temporal dimension of fiscal and economic stress, we create ample avenues for further research.     

Formula budgeting: The economics and analytics of fiscal policy under rules

The dramatic change in aggregate fiscal policy in recent years has contributed to a shift from process rules to allocation rules in federal budgeting. Although the allocation rules inherent in formula budgeting seem to offer fairness in times of fiscal constraint, they actually impose arbitrary program-level budgets that reflect the peculiarities of baselines, accounting conventions, and time horizons. Formula budgeting also changes the analytical environment, forcing policy analysts to pay greater attention to institutional arrangements.     

Independent and competing agencies: An effective way to control government

Controlling government is a primary focus of the politico-economic literature. Recently, various political institutions have been analyzed from this perspective, most importantly balanced budget rules, fiscal federalism, and direct democracy. However, one type of institution has been neglected so far: elected competitors to the government. Such institutional competition between the government and an independent agency can be found at the Swiss local level, where finance Commissions compete with the government. In some parts of Switzerland, local finance commissions can ex ante criticize government projects and bring alternative policy proposals onto the political agenda, which are then voted on by the citizens. Thus, they become strong competitors to the government. We econometrically investigate this institutional setting by comparing the 26 Swiss cantons. We find the power of the local finance commission to have an economically relevant, statistically significant and robust negative effect on the tax burden and on public expenditures.     

Party incumbency and economic growth in the United States: 1929 to 1984

This paper investigates the relationship between Democratic presidential incumbency and economic growth in the United States in the long run. The analysis shows the Democrats have stimulated growth beyond trends when two conditions are met: first, when an incoming administration is formally committed to promoting growth and employment, and second, when that administration has at least two terms of office to implement those goals. The transmission mechanisms linking incumbency and growth are explored by means of a standard Keynesian IS-LM model, which is augmented by additional relevant variables. The transmissions process works via monetary policy, fiscal policy, and welfare expenditure. It also seems likely that changing expectations of consumers and investors stimulated the economy beyond trends for some Democratic administrations.     

Fiscal Decentralization as Development Policy

Fiscal Decentralization is a popular economic development strategy among transition and developing countries. This article reviews the advantages of fiscal decentralization in a theoretical context, but critiques the relevance of the standard theory of federalism as it applies to emerging economies. It is argued that the macroeconomic benefits of fiscal centralization, the absence of good instruments of local government finance, and the centralist politics that characterize most low income countries have been strong enough to hold back increased emphasis on local government finance.     

Budgetary Devices for Curbing Spending Prone Ministers and Bureaucrats

In this paper I study asimple game of the budgetary process. Thegame has three players. A spending proneminister, who proposes a budget, a primeminister, who accepts or vetoes, and abureaucrat who provides non-verifiableinformation about policy. The bureaucratis appointed by the spending minister. Ishow that in this setting public spendingis excessive. This result stems from theproposal power of the minister, and hisincentive to appoint a spending pronebureaucrat. Next, I examine two devices forcontrolling public spending: binding budgettargets imposed by the prime minister, anddelegating veto power to a spending aversefinance minister. It is shown that thelatter device is more effective than theformer device to curb a spending proneminister, because it not only reduces theproposal power of the spending minister,but also induces him to appoint lessspending prone bureaucrats.     

Fiscal Policy Composition,Public Debt,and Economic Activity

This paper uses a dynamic general equilibrium model i) toinvestigate how changes to different spending and revenue items of the budgetaffect economic activity and public finance; and ii) to evaluate thewelfare costs of alternative fiscal policy maneuvers. The paper shows that,unlike an increase in government purchases of final goods, an increasein public employment and transfers can have a contractionary effect onthe economy in the same way as a rise in tax rates. It also suggests thatfiscal adjustments implemented by cutting spending items increasehouseholds' welfare and are more effective in reducing the primary deficitand public debt than are increases in tax rates.