Budget Institutions and Fiscal Performance in Low-Income Countries

Abstract

This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy.Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.This paper presents, for the first time, multi-dimensional indices of the quality of budget institutions in low-income countries.The indices allow for benchmarking against the performance of middle-income countries, across regions, and according to different institutional arrangements that deliver good fiscal performance.Using the constructed indices, the paper provides preliminary empirical support for the hypotheses that strong budget institutions help improve fiscal balances and public external debt outcomes; and countries with stronger fiscal institutions have better scope to conduct countercyclical policies.