The effect of fiscal system reform on fiscal policy outcomes
| Author | Hadi Salehi Esfahani,Sangmok Lee |
| Date | 01 May 2020 |
| DOI | http://doi.org/10.1111/sjpe.12230 |
| Published date | 01 May 2020 |
186
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wileyonlinelibrary.com/journal/sjpe Scott J Polit Econ. 2020;67:186–200.
© 2019 Scottish Econ omic Society
1 | INTRODUCTION
International o rganizations , such as the IMF and O ECD, have recommende d that government s reform their ac‐
counting from a c ash basis to an accrual basis.1 In a ccrual accounting, tr ansactions are reco gnized when economic
events occur, while in c ash accounting, transact ions are recognized w hen cash is received and paid. Accr ual ac‐
counting produces more relevant, reliable, and comparable financial information, which contributes to fiscal ac‐
countabilit y and transparen cy, improving the fina ncial management of gove rnments (Blönd al, 2003; Bunea ‐Bontas
& Petre, 2009; C han, 2003; Guthrie, 1998).
1 The IMF's GFS M (Government Fi nancial Stati stics Manual ) 2001, the UN's S NA (System of Nati onal Accounts) 20 08, the EU's E SA (European
System of Natio nal and Regiona l Accounts) 1995, and th e IFAC's IPSAS (Int ernational Pu blic Sector Acc ounting Stand ards) 1992 recomme nd that
government s make financia l statements o n the accrual ba sis.
Accepted: 27 Augu st 2019
DOI: 10 .1111/sjpe.1 2230
ORIGINAL ARTICLE
The effect of fiscal system reform on fiscal policy
outcomes
Sangmok Lee1 | Hadi Salehi Esfahani2
1Ministry of E conomy and Finance,
Sejong‐si, Korea
2Departm ent of Economics, Uni versity of
Illinois at Urb ana‐Champaign , Urbana, IL,
USA
Correspondence
Sangmok Lee , Director of Economi c
Structur al Reform Policy Div ision, Ministr y
of Economy and Fin ance, 477, Galmae‐ro,
Sejong‐si 30109, Korea .
Email: rhiesm@moef.go.kr
Abstract
We investigate how reform in governm ental accounting
affects fis cal policy outcom es including debt, b alance, and
fiscal transparency. Since a change from cash to accrual ac‐
counting can be rega rded as a natural expe riment among
governments, a fixe d‐effects mo del is exploited. We dis‐
cover that the change diminis hes debt in developed cou n‐
tries, but expan ds it in less‐developed on es, with strong
effects in highly indebted co untries. The change improves
balance in developed co untries and worsens it in less‐devel‐
oped countries, w hich is significant for developed countr ies
with large deficits. Transparency is im proved only in less
transparent developed countries.
KEYWORDS
fiscal syst em reform, governmental a ccounting, fiscal poli cy
outcomes, fiscal transparency, quantile regression
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