Impact of budget institutions on the fiscal discipline: An empirical study on European Union countries

The fact that public debt and public deficit become unsustainable indicates that there is indisciplined public fiscal management. However, this don't show the underlying causes of indisciplined. According to the budget institutions approach, which is one of the approaches regarding the problem of fiscal indisciplinary, the structural characteristics of each rule and regulation which are used in the preparation, approval, implementation and audit of a budget affect the fiscal discipline by determining the features of the fiscal outputs. One of the important features of public fiscal management is that public revenues collected from the general public are allocated based on the decisions of executive and legislative powers. In order to solve this situation which can be interpreted as a representation problem, the centralization tendencies to be followed at each stage of the budget process are emphasizes. In this way, it is aimed to eliminate the problems caused by the common pool problem and the agent-principal relationship. In this study, which has a fiscal institutionalist approach, the contribution of increasing centralization to the fiscal discipline in the budget process and the relationship of the institutionalization of centralization with the fiscal governance criteria are investigated. The effectiveness of the fiscal governance elements which consists of fiscal rule, the medium-term budgetary framework and the independent fiscal authorities was examined in the context of the experiences of the European Union member countries. The results of the study show that there is no significant relationship was found between numerical fiscal rules and public debt within the scope of panel cointegration analysis of EU countries during the dates 1995-2016. However it was found that numerical fiscal rules reduce public deficits. This study also examined the fiscal governance practices in Turkey. The findings inticate that considering the legal status of Sayıştay and its mission, this institution doesn't have any role in the formulation and evaluation of fiscal policy. In addition, the results reveale that Sayıştay doesn't go beyond being a high audit institution and it shouldn't be considered as an independent fiscal authority. Keywords: Budget institutions, Fiscal discipline, Fiscal governance, Panel cointegration analysis