The Use of Financial Information for Budget Cuts under Unprecedented Fiscal Pressure

This is the first quantitative research on whether, despite time constraints and the political nature of the budgetary process, governments and policymakers use financial information for budget cuts under unprecedented fiscal pressure caused by COVID-19. Especially, we concentrate on financial information that provides useful information to identify the progress of government projects and therefore, the allocation efficiency of government budgets. For this examination, we exploit budget reductions during the 2020 fiscal year in South Korea. We find that the central government and policymakers utilize such financial information for budget cuts even under unprecedented fiscal stress.