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    • The increase observed for the sub indices related

    2018-11-15

    The increase observed for the sub-indices related to the stages of planning and negotiation (SI), approval (SII) and execution of the budget (SIII) over the period of analysis did not change the relative position of these sub-indices with respect to fiscal discipline: the budgetary institutions that govern the preparation promote a greater control of government spending compared with institutions that manage the execution, and these, in turn, stand out compared with the institutions that define the approval of the budget (Graph 2). Regarding the budget categories (Graphs 3A and B), institutional changes are observed to have strengthened the powers of the budgetary authority in terms of the definition of the main budgetary orexin (CA), expanded the existing rules and controls in the budgetary process (CB), increased the sustainability and credibility of the budget (CC), as well as its comprehensiveness (CD), and made the current process more transparent (CE). The sub-index CC exhibited the highest growth rate between 1985 and 2009, which was a result of the higher relative integration between planning and budget established by the 1988 Constitution, particularly between the LDO and LOA; the inclusion of new information on the budget bill, such as the macroeconomic projections determined by the LRF; the expansion in the scope of analysis of the Legislature on fiscal policy and the budget; and the monitoring of public companies and sub-national governments. Regarding the CE sub-index, this was the last index to start its growth trajectory. The institutional changes that promoted greater transparency of the current budget process were performed only recently, with the start of the public hearings held by the Legislature in 1996, the expansion of the access to the budget bill in 1999 and the dissemination of Fiscal Management Reports (Relatórios de Gestão Fiscal – RGF) and Summary Budget Execution Reports (Relatórios Resumidos da Execução Orçamentária – RREO) by the LRF in 2000. Finally, according to the methodology proposed by Dabla-Norris et al. (2010), the changes that made the most progress towards greater fiscal discipline did not occur after the adoption of the inflation targeting system by the Brazilian government, which requires fiscal discipline, but throughout the 1990s in an environment of severe fiscal problems in the country. The LRF is therefore an important milestone for the management of public resources, but it should be seen as part of a process initiated in the 1980s and that remains ongoing.
    Budget institutions and fiscal results In the empirical literature that studies the budget institutions, the main question that budget indices seek to answer is: what impact do these institutions exert on the fiscal result? Various models, samples and estimation methods are used to evaluate the possible effects. The common point of these studies, as mentioned in section 2, is the use of samples from a group of countries, whether for a single period (cross-section) or for multiple periods (panel). The primary result of the public sector or the central government, usually as a percentage of GDP, is then regressed on the indexes, with the economic and demographic characteristics of these countries used as control variables, for example, the GDP growth rate, the degree of openness to trade, the initial level of government debt or its share in GDP, the percentage of the population above 65 years and below 15, among others. This was the path used by Alesina et al. (1999) and Dabla-Norris et al. (2010). Another method to assess the impact of institutions on the fiscal behaviour of the government is to estimate a fiscal policy reaction function, as performed by Debrun and Kumar (2007), in which the primary result of the government in a period t is a function of the government debt in the t−1 period, with both variables being a proportion of the GDP, and a set of control variables, including the budget indices.