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The literature on fiscal institutions has established a connection between the design of fiscal institutions and a country's political fundamentals. The paper includes a review of the party and electoral systems in the Central and Eastern European countries (the CEECs) and then reaches conclusions on what modes of fiscal governance ("commitment", "delegation", "fiefdom") these countries should have developed based on their political fundamentals. Two major conclusions stand out. First, all of the countries have multi-dimensional social cleavage space which, together with the dominance of proportional electoral systems, suggests diverse party systems. This is a recipe for multi-party governments. Indeed, coalition governments have been dominant in the CEECs suggesting in turn that the majority of these countries should be leaning towards commitment approach. Second, the collapse of communism and consequent social changes led rather unsurprisingly to a certain political turmoil. This was evident especially during the first half of the 1990s. Some countries were affected more than others. Party structures have been in a constant change and reforms in the electoral laws have not been uncommon resulting in some countries to frequent shifts between different government types. This suggests that these countries have not been able to develop a coherent way to tackle the common pool resource problem. The reality largely confirms these expectations. The results therefore indicate that no "onesize- fits-all" solutions exist in fiscal management. Consequently, the design of such institutions should pay due attention to the political factors, alongside with the economic ones. The results indicate further that a certain degree of political stability is a prerequisite for stable fiscal conditions.

This paper presents twelve budget institutions that can support planning and delivery ofcredible fiscal strategies in the fiscal policy-making process. The resulting framework is applied to seven low-income countries and the status of their budget institutions compared to the G-20 advanced and emerging market economies. The paper then presents recommendations for designing and implementing appropriate fiscal strategy for low- income countries. Particular attention is paid to prioritization and sequencing of reformefforts

AbstractThis paper considers the effects of fiscal governance in Central and East European countries 1998–2008. The first part makes predictions about which form of fiscal governance fits which form of government. Under multi-party coalition governments, fiscal contracts where governments make political commitments to multi-annual fiscal plans work well. In countries where two political blocks face off against one another, delegation based around a strong finance ministry should be most effective. The second part examines electoral and party systems, which affect the form of government in place. The third part documents norms, rules, and institutions in place. The final section considers the joint effects of fiscal governance on fiscal outcomes. On balance, the underlying political climate is crucial for determining what types of fiscal norms, institutions, and rules function best. The more countries diverge from their expected form of fiscal governance, the greater the increase in a country's debt burden.

Cover -- Contents -- I. Introduction -- II. The Finance Ministry and its Functions -- A. Policy, Regulatory, and Transactional Functions -- B. Centralization vs. Devolution of Functions -- C. Organizational Structure of Ministries of Finance -- D. Formal and Informal Rules of Behavior within an Organization -- E. Staffing of Finance Ministries -- III. Emerging Trends of Finance Ministries' Functions and Organization -- A. Traditional vs. Emerging Models of Finance Ministries -- B. Reorganizing Ministries of Finance -- IV. Principles and Challenges in Reorganizing a Finance Ministry