A budget stabilization fund (BSF) is an important fiscal instrument for states to stabilize their budgets, but studies have found varying results regarding its impact. We conduct a meta-analysis to determine whether and under what conditions BSFs can serve as an effective countercyclical tool. By synthesizing a total of 540 effect sizes from 23 original studies, we find that on average, BSFs have a moderate positive effect on government savings and a small negative effect on fiscal stress. Additionally, strict withdrawal rules seem to attenuate the positive relationship between BSFs and government savings, and compromise the negative relationship between BSFs and fiscal stress. The presence of budget balance requirements, party conflict and some other environmental factors may also moderate the BSF-savings and BSF-stress relationships. This research contributes to the BSF literature and provides useful policy recommendations for state governments to consider when designing or revising their BSF legislations.
ASJC Scopus subject areas
- Business and International Management
- Public Administration