The fiscal and monetary institutions of CESEE countries

Publishing date: 04 February 2011
Authors: Zsolt Darvas

This working paper by Zsolt Darvas and Valentina Kostyleva examines the role of fiscal and monetary institutions in macroeconomic stability and budgetary control in CESEE (central, eastern and south eastern European) countries in comparison to other OECD countries. A new budgetary discipline index suggests that fiscal institutions are weaker in most CESEE countries than in non-CESEE OECD countries. The sizeable debt/GDP ratio declines in CESEE before the crisis was largely the consequence of a very favourable relationship between the economic growth rate and the interest rate, but such a favourable relationship is not expected in the future. Econometric estimations confirm that better monetary institutions reduce macroeconomic volatility and that countries with better budgetary procedures have better fiscal outcomes.

A version of this publication was also released on the OECD Journal on Budgeting

About the authors

Zsolt Darvas

Zsolt Darvas is a Senior Fellow at Bruegel and a part-time Senior Research Fellow at the Corvinus University of Budapest. He joined Bruegel in 2008 as a Visiting Fellow, and became a Research Fellow in 2009 and a Senior Fellow in 2013.

From 2005 to 2008, he was the Research Advisor of the Argenta Financial Research Group in Budapest. Before that, he worked at the research unit of the Central Bank of Hungary (1994-2005) where he served as Deputy Head.

Zsolt holds a Ph.D. in Economics from Corvinus University of Budapest where he teaches courses in Econometrics but also at other institutions since 1994. His research interests include macroeconomics, international economics, central banking and time series analysis.