Does fiscal transparency matter for financial (in)stability? An empirical study on emerging and developing countries

The purpose of the study is to examine to effect of fiscal transparency on financial instability in emerging and developing countries. On the top of the usual country -specific variables proposed by literature, the role of fiscal transparency is for the first time examined and found to be negative and significant beyond a certain threshold, confirming an inverted U-shaped relationship between fiscal transparency and financial instability. Our result has implications on the design of fiscal policy and on the fight against financial instability.