Fiscal federalism and macroeconomic governance : for better or for worse?
AbstractIn analyzing the institutional environment for macroeconomic management, the author discusses monetary policy, fiscal policy, and subnational borrowing. In analyzing the macroeconomic dimensions of securing an economic union, he discusses the regulatory environment, tax coordination, transfer payments and social insurance, intergovernmental fiscal transfers, and regional equity. Finally, he discusses the challenges of globalization and draws lessons from experience about fiscal reform in developing countries. Among them: 1) Monetary policy is best entrusted to an independent central bank with a mandate for price stability. 2) Fiscal rules accompanied by"gatekeeper"intergovernmental councils or committees provide a useful framework for fiscal discipline and coordination of fiscal policy. 3) The integrity and independence of the financial sector contribute to fiscal prudence in the public sector. 4) To ensure fiscal discipline, governments at all levels must be made to face the financial consequences of their decisions. 5) Societal norms and consensus about the roles of various levels of government and limits to their authority are vital to the success of decentralized decisionmaking. 6) Tax decentralization is a prerequisite for subnational access to credit markets. 7) Higher-level institutional assistance may be needed to finance local capital projects. 8) An internal common market is best preserved by constitutional guarantees. 9) Intergovernmental transfers in developing countries undermine fiscal discipline and accountability while building transfer dependencies that cause a slow economic stagnation of fiscally disadvantaged regions. 10) Periodic review of jurisdictional assignments is essential to realign responsibilities with changing economic and political realities. 11) Finally, and contrary to a common misconception, decentralized fiscal systems offer more potential improved macroeconomic governance than do centralized fiscal systems.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by The World Bank in its series Policy Research Working Paper Series with number 2005.
Date of creation: 30 Nov 1998
Date of revision:
Municipal Financial Management; Banks&Banking Reform; Public Sector Economics&Finance; National Governance; Payment Systems&Infrastructure; Municipal Financial Management; Economic Stabilization; National Governance; Banks&Banking Reform; Public Sector Economics&Finance;
Other versions of this item:
- Anwar Shah, 2014. "Fiscal federalism and macroeconomic governance : for better or for worse?," Annals of Economics and Finance, Society for AEF, vol. 15(1), pages 200-251, May.
- Anwar Shah, 2008. "Fiscal federalism and macroeconomic governance : for better or for worse?," CEMA Working Papers 584, China Economics and Management Academy, Central University of Finance and Economics.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Anwar Shah, 1996. "A Fiscal Need Approach to Equalization," Canadian Public Policy, University of Toronto Press, vol. 22(2), pages 99-115, June.
- Cukierman, Alex & Webb, Steven B & Neyapti, Bilin, 1992. "Measuring the Independence of Central Banks and Its Effect on Policy Outcomes," World Bank Economic Review, World Bank Group, vol. 6(3), pages 353-98, September.
- Sheikh, Munir A & Winer, Stanley L, 1977. "Stabilization and Nonfederal Behaviour in an Open Federal State: An Econometric Study of the Fixed Exchange Rate, Canadian Case," Empirical Economics, Springer, vol. 2(3), pages 195-211.
- Jun Ma, 1995. "Macroeconomic management and intergovernmental relations in China," Policy Research Working Paper Series 1408, The World Bank.
- Prud'homme, Remy, 1995. "The Dangers of Decentralization," World Bank Research Observer, World Bank Group, vol. 10(2), pages 201-20, August.
- Shah, Anwar, 2004. "Fiscal decentralization in developing and transition economies: progress, problems, and the promise," Policy Research Working Paper Series 3282, The World Bank.
- Hehui Jin & Yingyi Qian & Barry Weingast, 1999. "Regional Decentralization and Fiscal Incentives: Federalism, Chinese Style," Working Papers 99013, Stanford University, Department of Economics.
- Anwar Shah & Theresa Thompson & Heng-fu Zou, 2004.
"Decentralising the public sector: The Impact of Decentralisation on Service Delivery, Corruption, Fiscal Management and Growth in Developing and Emerging Market Economies: A Synthesis of Empirical Evi,"
CESifo DICE Report,
Ifo Institute for Economic Research at the University of Munich, vol. 2(1), pages 10-14, October.
- Anwar Shah & Theresa Thompson & Heng-fu Zou, 2004. "Decentralising the public sector: The Impact of Decentralisation on Service Delivery, Corruption, Fiscal Management and Growth in Developing and Emerging Market Economies: A Synthesis of Empirical Evi," CEMA Working Papers 492, China Economics and Management Academy, Central University of Finance and Economics.
- Chang Woon Nam & Rüdiger Parsche, 2001. "Municipal Finance in Poland, the Slovak Republic, the Czech Republic and Hungary: Institutional Framework and Recent Development," CESifo Working Paper Series 447, CESifo Group Munich.
- Peter Friedrich & Anita Kaltschütz & Chang Woon Nam, 2004. "Recent Development of Municipal Finance in Selected European Countries," ERSA conference papers ersa04p288, European Regional Science Association.
- Jorge Martinez-Vazquez & Robert McNab, 2005.
"Fiscal Decentralization,Macrostability, and Growth,"
International Center for Public Policy Working Paper Series, at AYSPS, GSU
paper0506, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
- Jorge Martínez Vázquez & Robert M. McNab, 2006. "Fiscal decentralization, macrostability and growth," Hacienda Pública Española, IEF, vol. 179(4), pages 25-49, September.
- Jorge Martínez-Vázquez & Robert M. McNab, . "Fiscal Decentralization, Macrostability And Growth," Working Papers 11-03 Classification-JEL , Instituto de Estudios Fiscales.
- Joaquín Mauricio Zuleta Arango & Lisandro López Marín & Daniel Sánchez García, 2010. "Descentralización Y Disparidades Económicas Territoriales En Colombia (1990-2005)," Observatorio de la Economía Latinoamericana, Grupo Eumed.net (Universidad de Málaga), issue 130, April.
- Jaime Bonet, 2004. "Descentralización fiscal y disparidades en el ingreso regional: la experiencia colombiana," DOCUMENTOS DE TRABAJO SOBRE ECONOMÃA REGIONAL 002282, BANCO DE LA REPÚBLICA - ECONOMÍA REGIONAL.
- Ligia Melo B., .
"Impacto de la Descentralización Fiscal sobre la Educación Pública Colombiana,"
Borradores de Economia
350, Banco de la Republica de Colombia.
- Ligia Melo Becerra, 2005. "Impacto De La Descentralización Fiscal Sobre La Educación Pública Colombiana," BORRADORES DE ECONOMIA 002802, BANCO DE LA REPÚBLICA.
- Iqbal, Nasir & Nawaz, Saima, 2010. "Fiscal Decentralization and Macroeconomic Stability: Theory and Evidence from Pakistan," MPRA Paper 27184, University Library of Munich, Germany.
- Roy Bahl & Jorge Martinez-Vazquez, 2013.
"Sequencing Fiscal Decentralization,"
Annals of Economics and Finance,
Society for AEF, vol. 14(3), pages 641-687, December.
- Eduardo Wiesner Durán, 2000. "La Descentralización, el Ajuste Fiscal y el Desarrollo Municipal en Ecuador," IDB Publications 4018, Inter-American Development Bank.
- Maria Balaguer-Coll & Diego Prior & Emili Tortosa-Ausina, 2010. "Decentralization and efficiency of local government," The Annals of Regional Science, Springer, vol. 45(3), pages 571-601, December.
- Juan David Barón Rivera & Adolfo Meisel Roca, 2003. "La descentralización y las disparidades económicas regionales en Colombia en la década de 1990," DOCUMENTOS DE TRABAJO SOBRE ECONOMÃA REGIONAL 002975, BANCO DE LA REPÚBLICA - ECONOMÍA REGIONAL.
- Jaime Bonet, 2006. "Desequilibrios regionales en la política de descentralización en Colombia," DOCUMENTOS DE TRABAJO SOBRE ECONOMÃA REGIONAL 002293, BANCO DE LA REPÚBLICA - ECONOMÍA REGIONAL.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Roula I. Yazigi).
If references are entirely missing, you can add them using this form.