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Fiscal Decentralization,Macrostability, and Growth

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Abstract

This paper examines how fiscal decentralization may influence economic growth. Previous research on this question has primarily focused on the potential direct relationship between decentralization and growth. In this paper, we also examine the potential indirect influence of decentralization on growth through its impact on macroeconomic stability. Using an international panel data set, we find that fiscal decentralization appears to reduce the rate of inflation in the sample countries and it does not appear to directly influence economic growth. Fiscal decentralization, however, appears to have an indirect, positive effect on growth through its positive influence on macroeconomic stability. The indirect effect of fiscal decentralization on economic growth via macroeconomic stability has not been previously identified in the literature.

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Paper provided by International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University in its series International Center for Public Policy Working Paper Series, at AYSPS, GSU with number paper0506.

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Length: 30 pages
Date of creation: 01 Feb 2005
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Handle: RePEc:ays:ispwps:paper0506

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Keywords: Fiscal Decentralization; Macrostability; and Growth;

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References

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Citations

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Cited by:
  1. Jorge Martinez-Vazquez & Robert McNab, 2001. "Fiscal Decentralization and Economic Growth," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0101, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
  2. Zareh Asatryan & Lars P. Feld, 2013. "Revisiting the Link between Growth and Federalism: A Bayesian Model Averaging Approach," CESifo Working Paper Series 4357, CESifo Group Munich.
  3. Neyapti, Bilin, 2010. "Fiscal decentralization and deficits: International evidence," European Journal of Political Economy, Elsevier, vol. 26(2), pages 155-166, June.
  4. Bilin Neyapti & Zafer Akin & Zeynep B. Cevik, 2011. "Does Fiscal Decentralization Promote Fiscal Discipline?," Departmental Working Papers 1101, Bilkent University, Department of Economics.
  5. Neyapti, Bilin, 2013. "Fiscal decentralization, fiscal rules and fiscal discipline," Economics Letters, Elsevier, vol. 121(3), pages 528-532.
  6. Bilin Neyapti & Zeynep Burcu Bulut-Cevik, 2011. "Fiscal Decentralization, Redistribution and Growth," Koç University-TUSIAD Economic Research Forum Working Papers 1114, Koc University-TUSIAD Economic Research Forum.
  7. Ahmad Zafarullah Abdul Jalil & Mukaramah Harun & Siti Hadijah Che Mat, 2012. "Macroeconomic Instability and Fiscal Decentralization: An Empirical Analysis," Prague Economic Papers, University of Economics, Prague, vol. 2012(2), pages 150-165.
  8. Ramiro Gil-Serrate & Julio López-Laborda, . "Modelling Tax Decentralisation And Regional Growth," Working Papers 14-05 Classification-JEL , Instituto de Estudios Fiscales.
  9. Iqbal, Nasir & Nawaz, Saima, 2010. "Fiscal Decentralization and Macroeconomic Stability: Theory and Evidence from Pakistan," MPRA Paper 27184, University Library of Munich, Germany.
  10. Philip Bodman & Kelly-Ana Heaton & Andrew Hodge, . "Fiscal Decentralisation and Economic Growth: A Bayesian Model Averaging Approach," MRG Discussion Paper Series 3509, School of Economics, University of Queensland, Australia.
  11. ESTEBAN, Sonia & DE FRUTOS, Pablo & PRIETO; Maria Jose, 2008. "Fiscal Decentralization And Economic Growth. Empiric Evidence From A Regional Perspective," Regional and Sectoral Economic Studies, Euro-American Association of Economic Development, vol. 8(1), pages 29-58.
  12. Philip Bodman & Harry Campbell & Kelly-Ana Heaton & Andrew Hodge, . "Fiscal Decentralisation, Macroeconomic Conditions and Economic Growth in Australia," MRG Discussion Paper Series 2609, School of Economics, University of Queensland, Australia.
  13. Pierre Salmon, 2013. "Decentralization and growth: what if the cross-jurisdiction approach had met a dead end?," Constitutional Political Economy, Springer, vol. 24(2), pages 87-107, June.
  14. Andreas Kyriacou & Oriol Roca sagalés, 2009. "Fiscal descentralization and the quality of government: evidence from panel data," Hacienda Pública Española, IEF, vol. 189(2), pages 131-155, June.

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