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Legislative budgetary power and fiscal discipline in the euro area

Moira Catania (Institute for European Studies, University of Malta, Msida, Malta)
Mark J. Baimbridge (Faculty of Management, Law and Social Sciences, University of Bradford, Bradford, UK)
Ioannis Litsios (Plymouth Business School, University of Plymouth, Plymouth, UK)

Journal of Public Budgeting, Accounting & Financial Management

ISSN: 1096-3367

Article publication date: 28 June 2021

Issue publication date: 15 October 2021

149

Abstract

Purpose

The objective of this study is to understand the budgetary role of national legislatures in euro area (EA) countries and to analyse implications for fiscal discipline.

Design/methodology/approach

Building on the budget institutions literature, a legislative budgetary power index for all the 19 euro area (EA) countries is constructed using Organisation for Economic Co-operation and Development (OECD) and European Commission data as well as data generated from questionnaires to national authorities. A two-way fixed effects panel data model is then used to assess the effect of legislative budgetary power on the budget balance in the EA during 2006–2015.

Findings

Overall, in the EA, formal legislative powers vis-à-vis the national budgetary process are weak, but there is more legislative involvement in Stability and Growth Pact (SGP) procedures, and legislative budgetary organisational capacity is generally quite good. In contrast to the traditional view in the budget institutions literature, this study’s empirical findings show that strong legislative budgetary power does not necessarily result in larger budget deficits.

Research limitations/implications

Data on legislative budgeting were available from different sources, and time series data were very limited.

Practical implications

There is scope to improve democratic legitimacy of the national budgetary process in the EA, without necessarily jeopardising fiscal discipline.

Originality/value

The constructed legislative budgetary power index covers all the 19 EA countries and has a broad scope covering various novel institutional characteristics. The empirical analysis contributes to the scarce literature on the impact of legislative budgeting on fiscal discipline.

Keywords

Acknowledgements

The authors would like to thank the participants of the 6th Academic International Conference on Law, Economics and Politics (AICILS 2018), organised by FLE Learning, which was held in St. Anne's College, Oxford, UK on 15–17th October 2018 and the participants of the University of Bradford (UK)'s Faculty of Management, Law and Social Sciences Doctoral Conference held on 13–14th June 2019 for helpful comments on previous drafts of the paper. The authors also would like to thank two anonymous reviewers for their insightful comments and suggestions, which helped them to improve the manuscript.

Funding: The research presented in this article was supported by the University of Malta's Scholarships and Bursaries Funds.

Declarations

Availability of data and material: The datasets generated during and analysed during the current study are available from the corresponding author on reasonable request.

Conflicts of interest/Competing interests: No potential conflict of interest was reported by the authors.

Citation

Catania, M., Baimbridge, M.J. and Litsios, I. (2021), "Legislative budgetary power and fiscal discipline in the euro area", Journal of Public Budgeting, Accounting & Financial Management, Vol. 33 No. 5, pp. 635-661. https://doi.org/10.1108/JPBAFM-03-2021-0037

Publisher

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Emerald Publishing Limited

Copyright © 2021, Emerald Publishing Limited

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