Measuring the fiscal governance instruments: A synthetic index for EU countries

Abstract

The aim of the paper is to examine the collective effect of fiscal governance instruments (i.e., fiscal rules, medium-term budgetary frameworks, independent fiscal institutions) on the fiscal outcomes of EU member states. The results of panel data model estimation for 28 EU countries for the period 2004-2016 confirm a statistically significant and positive impact of synthentic index for those instruments on the general government balance to GDP ratio. Additionally, an adjustment of the synthetic index was proposed, taking into account the degree of autonomy of independent fiscal institutions, and the link between medium-term budgetary frameworks and the annual budget.