Fiscal Transparency

It is widely believed that fiscal transparency has large and positive effects on fiscal performance. According to the IMF, “transparency in government operations is widely regarded as an important precondition for macroeconomic fiscal sustainability, good governance, and overall fiscal rectitude” (Kopits & Craig (1998, p. 1)). Indeed, both the IMF and the OECD are currently developing Codes of Best Practice for Fiscal Transparency. Similar arguments are found in the academic literature. Alesina & Perotti (1996) claim that “a lack of transparency makes fiscal discipline and expenditure control harder to achieve” and Poterba & von Hagen (1999), in a recent summary of the evidence on fiscal institutions, write that “higher levels of transparency are associated with lower budget deficits” (p. 2).