Fiscal federalism and macroeconomic governance : for better or for worse?
In 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.
References listed on IDEAS
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.:
- 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.
- Anwar Shah, 1996. "A Fiscal Need Approach to Equalization," Canadian Public Policy, University of Toronto Press, vol. 22(2), pages 99-115, June.
- Prud'homme, Remy, 1995. "The Dangers of Decentralization," World Bank Research Observer, World Bank Group, vol. 10(2), pages 201-20, August.
- Jun Ma, 1995. "Macroeconomic management and intergovernmental relations in China," Policy Research Working Paper Series 1408, The World Bank.
- 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.
When requesting a correction, please mention this item's handle: RePEc:cuf:journl:y:2014:v:15:i:1:shah. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Qiang Gao)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.