The Impact of Institutional Quality on Fiscal Discipline: An Analysis of OECD Countries

Indicators of institutional quality are based on six different indices published by the World Bank in 1996 within the framework of Universal Governance Indicators. These indicators have significant effects on many financial variables. Fiscal discipline can also be affected by indicators of institutional quality. Based on this, the study investigated the impact of "government effectiveness" on fiscal discipline in OECD countries using autoregressive panel data analysis estimation methods with 2009-2021 period data. According to the analysis results, the increase in the value of government effectiveness affects fiscal discipline negatively and significantly. This result shows that as government effectiveness increases, the share of public debt stock in gross domestic product, an indicator of fiscal discipline, will decrease. A definite conclusion could not be reached regarding the non-linear relationship between the two variables.