Macroeconomic Management and the Devolution of Fiscal Powers
AbstractSeveral of the transition economies are devolving fiscal authority to subnational governments at a time when it is also important to consolidate fiscal policy. This can be problematic because, without appropriate care, the central government's ability to determine the level and structure of revenues, public spending, and borrowing may well diminish as fiscal policy is devolved. This paper focuses on how the center can maintain its ability to conduct fiscal policy while devolving revenue, spending, and borrowing powers to lower levels of government. Empirical evidence shows that countries with good governance have maintained fiscal control despite a high degree of fiscal devolution. And decentralization is associated with better fiscal outcomes for middle-income countries with strong governance. Fiscal management issues are explored in four key areas: budget coordination mechanisms at the macro level, tax-effort incentives and revenue-sharing mechanisms, expenditure control and hard-budget constraints, and criteria and rules for borrowing.
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Bibliographic InfoArticle provided by M.E. Sharpe, Inc. in its journal Emerging Markets Finance and Trade.
Volume (Year): 39 (2003)
Issue (Month): 1 (January)
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Web page: http://mesharpe.metapress.com/link.asp?target=journal&id=111024
fiscal policies; intergovernmental relations; state and local government;
Other versions of this item:
- International Monetary Fund, 2002. "Macroeconomic Management and the Devolution of Fiscal Powers," IMF Working Papers 02/76, International Monetary Fund.
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- Roberto Fernández Llera & Carlos Monasterio Escudero, 2010. "¿Entre dos o entre todos? Examen y propuestas para la coordinación presupuestaria en España," Hacienda Pública Española, IEF, vol. 195(4), pages 139-163, december.
- James Gallagher & Daniel Hinze, . "Financing Options for Devolved Government in the UK," Working Papers 2005_24, Business School - Economics, University of Glasgow.
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