Interpreting fiscal accounting rules in the European Union

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. In the European Union, the creation of public debt statistics starts with member state governments' reports. The EU's statistical agency-Eurostat-then revises. How do these actors' incentives shape reported numbers? Governments have incentives to take a more favourable view of often ambiguous accounting rules than Eurostat. Lower debt improves governments' performance with domestic and external audiences. Eurostat is tasked with monitoring budgets for 'excessive' debts. We expect governments to present debt figures that Eurostat then revises upwards. This is more likely when governments have high debts, especially when in the eurozone, and prior to elections. Financial crises heighten the number of policies needing interpretation and both actors have more incentives to shape the numbers. We examine these propositions using Eurostat's debt revisions. We find debts are revised upwards more for eurozone countries with higher debt levels and years with unscheduled elections. Financial stress strengthens these effects. Terms of use: Documents inJEL-Codes: F340.

The Political Economy of Fiscal Transparency and Independent Fiscal Councils

“…More generally, the non-observability of d reflects the fact that voters ignore the details of the government's balance sheet, including its true net worth, providing fertile ground for creative accounting. For instance, Gandrud and Hallerberg (2016), show that Eurostat upward debt revisions are systematically larger for more indebted countries and when financial stress increases. In the remainder of the paper, d always refers to the net debt.…”

Why hide? Africa’s unreported debt to China

“…and deficit levels between 2012 and 2015 to "improve investor confidence" (Aragao & Linsi, 2020), and more recently Mozambique concealed $2.2 billion in private bank loans to avoid hitting its own public debt limits (Connelly, 2021). Gelpern (2018) writes that "governments in every national income group on every continent have been caught fudging debt-related statistics," and Michalski and Stoltz (2013) and Gandrud and Hallerberg (2017) find evidence that governments routinely falsify their balance-of-payments estimates. Hidden debt is hardly unique to countries in crisis; governments are regularly found to manipulate financial records to gain political and economic advantages (Dias et al, 2014), and recent history is littered with examples of governments jumping through impressive hoops to downplay debt burdens.…”