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DOI :10.26650/siyasal.2019.28.2.0003   IUP :10.26650/siyasal.2019.28.2.0003    Full Text (PDF)

An Econometric Analysis of the Relationship between the Budget Oversight Function of the Legislature and Fiscal Transparency

Süleyman Dikmen, Hüseyin Güçlü Çiçek

The transformation in the public fiscal management in recent years has made legislative budget oversight and fiscal transparency more important. The main purpose of the study is to determine whether the actualization of efficient budget oversight by the legislature would increase fiscal transparency or not. The relationship between the budget oversight of legislature and the fiscal transparency is tested empirically with the 2-Stage Least Squares Method (2SLS). In the analysis of International Budget Partnership dated 2017 and in which the Open Budget Survey data is used, 115 countries are given place. According to the results of the analysis it is determined that in case of an efficient budget oversight by the legislature, fiscal transparency would increase. Furthermore the factors that affect legislative budget oversight and fiscal transparency are determined in the study. 

Keywords: Budget oversight, Fiscal transparency, Legislature, Two-Stage Least Squares Method (2SLS)
DOI :10.26650/siyasal.2019.28.2.0003   IUP :10.26650/siyasal.2019.28.2.0003    Full Text (PDF)

Yasama Organının Bütçe Gözetim İşlevi ve Mali Saydamlık Arasındaki İlişkinin Ekonometrik Bir Analizi

Süleyman Dikmen, Hüseyin Güçlü Çiçek

Son yıllarda kamu mali yönetiminde yaşanan dönüşüm yasama organının bütçe gözetimini ve mali saydamlığı daha önemli hale getirmiştir. Çalışmanın temel amacı, yasama organının etkin bütçe gözetimi gerçekleştirmesi durumunda mali saydamlığın artıp artmadığını belirlemektir. Yasama organının bütçe gözetimi ile mali saydamlık arasındaki ilişki İki Aşamalı En Küçük Kareler Yöntemi (2SLS) ile ampirik olarak test edilmiştir. Uluslararası Bütçe Ortaklığının 2017 yılında yayınlanan Açık Bütçe Anketi verilerinin kullanıldığı analizde 115 ülkeye yer verilmiştir. Analiz sonucunda yasama organının bütçeyi etkin gözetlemesi durumunda mali saydamlığın artacağı sonucuna ulaşılmıştır. Ayrıca çalışmada yasama organının bütçe gözetimini ve mali saydamlığı etkileyen faktörler de belirlenmiştir. 

Keywords: Bütçe gözetimi, Mali saydamlık, Yasama organı, İki Aşamalı En Küçük Kareler Yöntemi (2SLS)

EXTENDED ABSTRACT


In the last quarter of the twentieth century, states faced serious budget deficits and the lack of fiscal transparency caused by the financial crises in East Asia and Mexico. In order for the lack of fiscal transparency to be eliminated, various national and international reformist actions have been taken. Through cutting public expenditures at the national level, extensive reforms have been developed in favour of fiscal transparency, policies have been applied for the preservation of fiscal discipline, the efficiency of the budget oversight of the legislature has been increased, and certain precautions that strengthen accountability have been taken. At the international level, the standards of fiscal transparency have started to be applied. “Code of Good Practices on Fiscal Transparency” was prepared in 1998 by the International Monetary Fund (IMF), and fiscal transparency evaluations have been made. Similarly, based on member country experiences, the Organisation for Economic Cooperation and Development (OECD) published its “Best Practices for Budget Transparency” guide in 2001. Besides, the attention of international institutions on fiscal transparency has increased day by day and, in order for fiscal transparency to be attained, they started to publish new guidelines and reports. As fiscal transparency and budget oversight could not be embedded in the fiscal system of the states in its fullest sense, despite the reformist actions, the subject remains on the agenda. 

The main purpose of the study on the relationship between the budget oversight of the legislature and fiscal transparency is to measure how the efficient budget oversight of the legislature affects fiscal transparency. The study also aims to analyse the factors that affect the budget oversight of the legislature and fiscal transparency. Budget is the legal basis of how much tax is collected from the citizens and where these taxes are spent. In representative democracies, the budget that is prepared by the executive organ, is audited and overseen by the legislature in order to preclude corruption and wastage, to inform the citizens and to control the executive organ. The study tries to determine whether the efficient use of this function by the legislature directs the government to be financially more transparent or not. 

In order to ensure fiscal transparency, the legislature gets actively involved in the budget processes. Besides ensuring fiscal transparency, the budget should be audited and overseen by an extrinsic institution as it is a policy tool of the government, as it reflects future goals, as it is the picture of the services to be rendered to the citizens, and as it reveals how much tax is to be collected from the citizens. The legislature oversees the efficient, effective and productive use of public income and expenses of the government. The legislature gets involved in the budget process by using the oversight instruments. The citizens call the deputies to account for the proper use of the authority they delegated. The oversight instruments contribute to the forestalment of corruption by increasing the efficiency of the oversight of the legislature. The assurance of fiscal transparency and accountability increases the legitimacy of the policies of the government. 

The literature (Ríos, Bastida, & Benito, 2016; Santiso, 2005) reveals that the efficient oversight of the budget by the legislature ensures accountability by increasing the fiscal transparency. On the other hand, there is a reverse causality between fiscal transparency and the budget oversight of the legislature. Increases in fiscal transparency and accountability also increase the budget oversight of the legislature. Furthermore, international institutions (Global Initiative on Fiscal Transparency [GIFT], 2017; International Monetary Fund [IMF], 2017; Organisation for Economic Cooperation and Development [OECD], 2002, 2015) admit that the realisation of an efficient oversight of the budget by the legislature supports the enabling of accountability and fiscal transparency.

The effect of budget oversight of the legislature on fiscal transparency is estimated with Two-Stage Least Squares (2-SLS) method for 115 countries. The budget oversight of the legislature and fiscal transparency datum are compiled from the Open Budget Survey 2017 of International Budget Partnership. As the survey was made in 2016, other data also belong to the year 2016. All the analyses are made through the Stata 13 packaged software. While generating data sets, as each institution’s method of calculation is different from others, and this, in turn, would hinder to attain sound and consistent results; data sets are compiled from the data of credible and internationally accepted institutions.

There is an endogeneity problem between fiscal transparency and the budget oversight of the legislature. In order to solve this problem, the 2-SLS method that takes the reciprocal relationship between the variables into account is used. 2-SLS is a statistical method that unbiasedly estimates the endogenous variables among simultaneous variables. The method is the estimation of the equation by Ordinary Least Squares (OLS) method twice. In this context, the factors that affect the budget oversight of the legislature are analysed for all the stages of the budget process (ex-ante oversight, current oversight, ex-post oversight and legislative budget oversight). Then, the factors that affect fiscal transparency are analysed. However, in this regression, the factors that affect the budget oversight of the legislature are accepted as instrumental variables and the 2-SLS method is used. 

In order to estimate ex-ante oversight, current oversight and legislative budget oversight, the OLS method is used. But, as the ex-post oversight variable consists only of a single survey question (as a dependent variable is qualitative), it is necessary to use ordered logit or ordered probit estimation methods. In the study, the ordered logit estimation method is preferred. 

As a result of the analysis, a positive relationship is determined between fiscal transparency and the budget oversight of the legislature. The result is in line with the literature (Ríos et all., 2016; Santiso, 2005). The results also affirm the views of international institutions (GIFT, 2017; IMF, 2007; OECD, 2002, 2015) carrying on studies claiming that efficient oversight of the budget by the legislature supports fiscal transparency and increases accountability. Furthermore, it is determined that ex-ante oversight, current oversight and ex-post oversight of the legislature are positively and disjointly correlated with fiscal transparency. The budget oversight of the legislature is evaluated in four stages, namely, ex-ante oversight, current oversight, ex-post oversight and legislative budget oversight. It is seen that having an Anglo-Saxon type of judicial system and the political competition have negative effects; and the level of democratization has positive effects on the ex-ante oversight of the legislature. It is determined that public participation into the budget process and per capita GDP have positive effects on current oversight while the oversight of the Supreme Audit Institution and the Anglo-Saxon type of judicial system adopted by the country have positive effects on ex-post oversight. It is also seen that the oversight of the Supreme Audit Institution has positive; having an Anglo-Saxon type of judicial system and political competition have negative effects on legislative budget oversight. It is identified that public participation, the level of democratization, the existence of budget deficits and per capita GDP have positive effects on fiscal transparency.


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APA

Dikmen, S., & Çiçek, H.G. (2019). An Econometric Analysis of the Relationship between the Budget Oversight Function of the Legislature and Fiscal Transparency. Siyasal: Journal of Political Sciences, 28(2), 181-205. https://doi.org/10.26650/siyasal.2019.28.2.0003


AMA

Dikmen S, Çiçek H G. An Econometric Analysis of the Relationship between the Budget Oversight Function of the Legislature and Fiscal Transparency. Siyasal: Journal of Political Sciences. 2019;28(2):181-205. https://doi.org/10.26650/siyasal.2019.28.2.0003


ABNT

Dikmen, S.; Çiçek, H.G. An Econometric Analysis of the Relationship between the Budget Oversight Function of the Legislature and Fiscal Transparency. Siyasal: Journal of Political Sciences, [Publisher Location], v. 28, n. 2, p. 181-205, 2019.


Chicago: Author-Date Style

Dikmen, Süleyman, and Hüseyin Güçlü Çiçek. 2019. “An Econometric Analysis of the Relationship between the Budget Oversight Function of the Legislature and Fiscal Transparency.” Siyasal: Journal of Political Sciences 28, no. 2: 181-205. https://doi.org/10.26650/siyasal.2019.28.2.0003


Chicago: Humanities Style

Dikmen, Süleyman, and Hüseyin Güçlü Çiçek. “An Econometric Analysis of the Relationship between the Budget Oversight Function of the Legislature and Fiscal Transparency.” Siyasal: Journal of Political Sciences 28, no. 2 (May. 2024): 181-205. https://doi.org/10.26650/siyasal.2019.28.2.0003


Harvard: Australian Style

Dikmen, S & Çiçek, HG 2019, 'An Econometric Analysis of the Relationship between the Budget Oversight Function of the Legislature and Fiscal Transparency', Siyasal: Journal of Political Sciences, vol. 28, no. 2, pp. 181-205, viewed 17 May. 2024, https://doi.org/10.26650/siyasal.2019.28.2.0003


Harvard: Author-Date Style

Dikmen, S. and Çiçek, H.G. (2019) ‘An Econometric Analysis of the Relationship between the Budget Oversight Function of the Legislature and Fiscal Transparency’, Siyasal: Journal of Political Sciences, 28(2), pp. 181-205. https://doi.org/10.26650/siyasal.2019.28.2.0003 (17 May. 2024).


MLA

Dikmen, Süleyman, and Hüseyin Güçlü Çiçek. “An Econometric Analysis of the Relationship between the Budget Oversight Function of the Legislature and Fiscal Transparency.” Siyasal: Journal of Political Sciences, vol. 28, no. 2, 2019, pp. 181-205. [Database Container], https://doi.org/10.26650/siyasal.2019.28.2.0003


Vancouver

Dikmen S, Çiçek HG. An Econometric Analysis of the Relationship between the Budget Oversight Function of the Legislature and Fiscal Transparency. Siyasal: Journal of Political Sciences [Internet]. 17 May. 2024 [cited 17 May. 2024];28(2):181-205. Available from: https://doi.org/10.26650/siyasal.2019.28.2.0003 doi: 10.26650/siyasal.2019.28.2.0003


ISNAD

Dikmen, Süleyman - Çiçek, HüseyinGüçlü. “An Econometric Analysis of the Relationship between the Budget Oversight Function of the Legislature and Fiscal Transparency”. Siyasal: Journal of Political Sciences 28/2 (May. 2024): 181-205. https://doi.org/10.26650/siyasal.2019.28.2.0003



TIMELINE


Submitted04.01.2019
Accepted26.10.2019
Published Online31.10.2019

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