We study the impact of the domestic stability pact on the accuracy of budget forecasts of Italian municipalities. Identification of the causal effect exploits a quasi-natural experiment generated by the removal in 2001 of the fiscal restraints on budget decisions for municipalities with fewer than 5,000 inhabitants and by stricter budgetary restrictions and severe penalties for noncompliers in 2002. We find that relaxing fiscal rules had a sizeable impact on budget forecast errors, especially in 2002. In fact, revenue (expenditure) forecast errors for municipalities with fewer than 5,000 inhabitants became 26% (22%) larger than in the past.
Fiscal rules and budget forecast errors of Italian municipalities / Picchio, Matteo; Santolini, Raffaella. - In: EUROPEAN JOURNAL OF POLITICAL ECONOMY. - ISSN 0176-2680. - ELETTRONICO. - 64:101921(2020). [10.1016/j.ejpoleco.2020.101921]
Fiscal rules and budget forecast errors of Italian municipalities
Matteo Picchio;Raffaella Santolini
2020-01-01
Abstract
We study the impact of the domestic stability pact on the accuracy of budget forecasts of Italian municipalities. Identification of the causal effect exploits a quasi-natural experiment generated by the removal in 2001 of the fiscal restraints on budget decisions for municipalities with fewer than 5,000 inhabitants and by stricter budgetary restrictions and severe penalties for noncompliers in 2002. We find that relaxing fiscal rules had a sizeable impact on budget forecast errors, especially in 2002. In fact, revenue (expenditure) forecast errors for municipalities with fewer than 5,000 inhabitants became 26% (22%) larger than in the past.I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.
