Essays on Fiscal Transparency and In°ation Expectations
This dissertation comprises two related essays on ¯scal transparency and a thirdessay on in°ation expectations.The ¯rst chapter provides a brief introduction to the next three chapters.The second chapter proposes some indices of ¯scal transparency based on theIMF's Code of Good Practices on Fiscal Transparency. Each country is assigned acategory for a number of aspects of ¯scal transparency based on the informationin the IMF's \Fiscal Transparency Reports on Observance of Standards and Codes(ROSC)". This classi¯cation is used to construct indices covering four clusters of ¯scaltransparency: data assurances, medium-term budgeting, budget execution reporting,and ¯scal risk disclosures. I consider the robustness of these indices to di®erent choicesassociated with construction of the indices. Lastly, I present some cross-countrycomparisons of ¯scal transparency and analyze the relationship of other institutionalvariables to ¯scal transparency.The third chapter examines several hypotheses regarding ¯scal transparency usingthe indices developed in the second chapter. I discuss the channels through which ¯s-iical transparency can a®ect market credibility, ¯scal discipline, and corruption. Aftercontrolling for other socio-economic variables, more transparent countries are shownto have better credit ratings, better ¯scal discipline, and less corruption.The ¯nal chapter considers the question whether in°ation expectations are drivenby household in°ation experience. Household surveys reveal that in°ation expecta-tions vary considerably across households. Furthermore, studies have found that theseexpectations vary systematically over demographic variables. This chapter suggeststhat the variation in individual expectations of in°ation may be based partly on thein°ation experienced by individual households. I calculate a household speci¯c levelof in°ation based on the BLS consumer expenditure survey (CEX) data. Then a two-sample two-stage estimation methodology is used to study the correlation betweenthe experienced household in°ation and reported in°ation expectations data in theMichigan Survey data for similar households. I ¯nd that expectations of in°ationindeed vary with the in°ation experience, moreover personal experience seems to beoverly in°uential.
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