The impact of legislative budgetary power on fiscal performance: An empirical analysis

In the constitutions of democratic countries, the most significant authority granted to parliaments is the power of the purse, because parliaments can scrutinize public expenditures and revenues thanks to the power of the purse and can make decisions on which public services will be financed with the public's money. With this feature, the power of the purse provides the legislature with a balancing and checking power against the executive. The legislature needs strong budgetary powers to use this power effectively and to increase budget efficiency. The effective use of the legislature's budgetary powers ensures that budget resources are allocated more efficiently, public administrators act in accordance with accountability and financial transparency and public financial management effectively combats corruption, fraud and waste. The literature contains a very limited number of studies examining the impact of legislature's budgetary powers on fiscal performance. Most empirical findings in these studies suggest that the legislature's budgetary powers have a negative impact on fiscal performance. However, some recent empirical studies have reported findings that contradict this prevailing view, suggesting that the legislature's budgetary powers do not negatively affect fiscal performance. This thesis examines the impact of legislative budgetary power on fiscal performance. In this context, "Legislative Budgetary Power Index" is constructed using data from the 2017, 2019, 2021 and 2023 Open Budget Surveys of the International Budget Partnership. Based on this index, empirical research is conducted to assess the impact of the budgetary power of the legislature on fiscal performance in 102 countries between 2016 and 2023. The empirical analysis employs a fixed effects panel model and finds that the legislative budgetary power has a statistically significant and positive impact on the primary budget balance. This suggests that increases in the legislature's budgetary powers enhance fiscal performance. Furthermore, the analysis reveals that the increases in the legislature's formal powers and organisational capacity in the budget process -as well as sub-indices such as "Legislative Oversight Powers on Extra-budgetary Funds", "Legislature's Relations with Supreme Audit Institutions" and "Legislative Access to Budgetary Information" under the Legislative Budgetary Power Index- also have a statistically significant and positive impact on the primary budget balance and these empirical findings are explained for the first time in the literature in this thesis.