Using an unbalanced panel of 27 OECD countries over the period 1970–2011, I examinewhether electoral motives influenced creative accounting. Governments engage in"below-the-line" operations, such as transactions in financial assets, that do not show upin the deficit figures but give rise to changes in debt. I use the difference between thechange in public debt and the deficit (stock-flow adjustment) to measure creativeaccounting. The results suggest that governments strategically engaged in creativeaccounting before regular elections so as to sugarcoat the budget balance. I also providean overview of government interventions that gave rise to large stock-flow adjustments.
Regierungen können Extrahaushalte gründen, um die Finanzierung staatlicher Aufgaben aus dem Kernhaushalt auszulagern. Die bis zum Jahr 2009 bestehende deutsche Schuldenregel sah eine Ausnahme für Extrahaushalte vor und deshalb bestanden für den Bund und die Länder Anreize zur Verschuldung außerhalb ihrer Kernhaushalte. Ich gebe einen historischen Überblick der staatlichen Extrahaushalte seit Bestehen der Bundesrepublik Deutschland. Insbesondere die Gründung von Extrahaushalten zur Finanzierung der deutschen Wiedervereinigung und die Stützungsmaßnahmen für Banken infolge der Finanzkrise führten dazu, dass die staatliche Neuverschuldung in einigenJahren deutlich höher ausfiel als die ausgewiesenen Defizite der Kernhaushalte. Ich diskutiere, inwieweit die neue deutsche Schuldenbremse die Staatsverschuldung in Extrahaushalten berücksichtigt und welche Gestaltungsmöglichkeiten der Bund und die Länder weiterhin zur Umgehung der erlaubten Kreditaufnahme über Extrahaushalte haben. ; By using special funds governments finance public activities outside the core budget. Until 2009 the German debt regime did not cover the borrowing of special funds. The German governments thus had an incentive to hide borrowing in special funds. In some periods, public debt increased more rapidly than the officially reported government deficit because the government borrowed via special funds. I describe special funds in Germany since 1949 and show for which purposes special funds were set up. Governments used special funds in particular to finance the German reunification in 1990 and support measures for financial institutions and economic stimulus packages during the financial crisis starting in 2008. I discuss to what extent the new German debt break limits the borrowing of special funds and show that governments still can circumvent the debt break by using some special funds.
This volume includes five self-contained chapters in the fields of public debt and fiscal transfer schemes. After an introduction to the topic, chapter 2 shows that the institutional setting of fiscal policy making needs to be considered when assessing the sustainability of fiscal policy. Using data for the U.S. and German state governments, the results of fiscal sustainability tests depend on whether fiscal transfers are taken into account. If fiscal transfers are not included in the primary surplus, the test results do not indicate that the U.S. and German state governments pursued sustainable fiscal policies. Chapter 3 examines whether the municipalities' voting behavior in state elections in a German state influenced the distribution of discretionary grants from the state level to the municipalities. The results show that discretionary grants were awarded to municipalities with many core supporters of the incumbent state government. In Chapter 4, a test on explosive time-series behavior is applied to the Target balances of the German Bundesbank. Chapter 5 examines whether electoral motives in OECD countries influenced "creative accounting" by the governments as measured by stock-flow adjustments (the difference between budget deficits and the change in public debt). Governments can engage in creative accounting to hide borrowing and sugarcoat the budget balance. The results show that stock-flow adjustments increased before elections. In Germany, stock-flow adjustments chiefly occurred via the creation of off-budget special funds that governments can use to finance public activities outside the core budget. Chapter 6 describes special funds in Germany and elaborates upon the purposes for which special funds were established. It discusses the extent to which the new German debt brake limits the borrowing of special funds and explains how the debt brake can be circumvented by using special funds.
This volume includes five self-contained chapters in the fields of public debt and fiscal transfer schemes. After an introduction to the topic, chapter 2 shows that the institutional setting of fiscal policy making needs to be considered when assessing the sustainability of fiscal policy. Using data for the U.S. and German state governments, the results of fiscal sustainability tests depend on whether fiscal transfers are taken into account. If fiscal transfers are not included in the primary surplus, the test results do not indicate that the U.S. and German state governments pursued sustainable fiscal policies. Chapter 3 examines whether the municipalities' voting behavior in state elections in a German state influenced the distribution of discretionary grants from the state level to the municipalities. The results show that discretionary grants were awarded to municipalities with many core supporters of the incumbent state government. In Chapter 4, a test on explosive time-series behavior is applied to the Target balances of the German Bundesbank. Chapter 5 examines whether electoral motives in OECD countries influenced "creative accounting" by the governments as measured by stock-flow adjustments (the difference between budget deficits and the change in public debt). Governments can engage in creative accounting to hide borrowing and sugarcoat the budget balance. The results show that stock-flow adjustments increased before elections. In Germany, stock-flow adjustments chiefly occurred via the creation of off-budget special funds that governments can use to finance public activities outside the core budget. Chapter 6 describes special funds in Germany and elaborates upon the purposes for which special funds were established. It discusses the extent to which the new German debt brake limits the borrowing of special funds and explains how the debt brake can be circumvented by using special funds.
We examine whether US and German state governments pursue sustainable fiscal policies taking into account fiscal transfers. Using panel data techniques we investigate whether the debt-to-GDP ratio had a positive influence on the primary surplus (Bohn-model). We show that including/excluding fiscal transfers changes the results. If fiscal transfers are not included in the primary surplus, the test results do not indicate that the US and German state governments pursued sustainable fiscal policies. Our results also suggest that fiscal transfers were positively related with debt. These findings indicate that intergovernmental transfers have implicitly subsidized debts.
Verfolgen Regierungen eine nachhaltige Fiskalpolitik? Diese Frage ist angesichts der hohen Staatsschulden vieler Länder insbesondere in Folge der Finanzkrise seit dem Jahr 2008 in den Fokus von Wissenschaft und Öffentlichkeit gerückt. Eine neue Studie zeigt, dass institutionelle Rahmenbedingungen eine wichtige Rolle bei der Beurteilung der fiskalischen Nachhaltigkeit spielen. In föderalen Staaten wie den Vereinigten Staaten und Deutschland beeinflussen Transferzahlungen die Haushaltsplanungen der Bundesstaaten bzw. der Bundesländer. Der Haushalt eines Landes verbessert sich, wenn es Transferzahlungen erhält, während sich der Haushalt eines Landes verschlechtert, wenn es Transferzahlungen abführen muss. Wenn Tests zur fiskalischen Nachhaltigkeit Transferzahlungen nicht berücksichtigen, können die Schlussfolgerungen verzerrt werden. So könnte die Fiskalpolitik eines Landes, das eigentlich defizitär wirtschaftet, aufgrund der empfangenen Transferzahlungen als nachhaltig angesehen werden. Deshalb müssen zur Beurteilung der Nachhaltigkeit der Fiskalpolitik in den amerikanischen Bundesstaaten und den deutschen Bundesländer Transferzahlungen berücksichtigt werden. Die Ergebnisse deuten nicht darauf hin, dass die amerikanischen Bundesstaaten und die deutschen Bundesländer eine nachhaltige Fiskalpolitik betrieben haben, wenn man die diskretionäre Fiskalpolitik ohne Transferzahlungen betrachtet. Länder mit hohen Schuldenstandsquoten haben mehr Transferzahlungen erhalten, die somit implizit die Schulden in den Ländern subventioniert haben.
Using the new unit root test by Phillips et al. (2011) we show that the Target balances of the German Bundesbank have been exploding from the beginning of 2009 to the beginning of 2013. By implementing a full-allotment policy and reducing the required minimum quality of collaterals in October 2008, the European Central Bank (ECB) refinanced credits in the GIIPS countries to a large extent. Private capital flowed out of the GIIPS countries (Greece, Italy, Ireland, Portugal and Spain), and the Target claims of the German Bundesbank increased significantly. If the Eurozone collapses, the German Bundesbank would lose its Target claims. Because the German Bundesbank would certainly request a recapitalization from the German federal government, German government debt might increase.
Fiscal sustainability tests have largely ignored the institutional setting of fiscal policy making. Fiscal equalization schemes in federal states are one such institution. We examine whether German state governments pursue sustainable fiscal policies taking into account fiscal equalization transfers. Using panel data techniques we assess fiscal sustainability by investigating whether the debt-to-GDP-ratio has had a positive influence on the primary surplus (Bohn-model). Distinguishing between different measures of the primary surplus we show that including/excluding fiscal transfers changes the results of the Bohn-model. While fiscal equalization transfers do render the fiscal policy of the states sustainable they also provide the states with incentives to increase government spending which, eventually, might render the entire equalization scheme politically unsustainable.
Fiscal sustainability tests have largely ignored the institutional setting of fiscal policy making. Fiscal equalization schemes in federal states are one such institution. We examinewhether German state governments pursue sustainable fiscal policies taking intoaccount fiscal equalization transfers. Using panel data techniques we assess fiscal sustainability by investigating whether the debt-to-GDP-ratio has had a positive influence on the primary surplus (Bohn-model). Distinguishing between different measures of theprimary surplus we show that including/excluding fiscal transfers changes the results of the Bohn-model. While fiscal equalization transfers do render the fiscal policy of the states sustainable they also provide the states with incentives to increase government spending which, eventually, might render the entire equalization scheme politically unsustainable.
