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Fiscal decentralization, macrostability and growth

Author

Listed:
  • Jorge Martínez Vázquez

    () (Georgia State University)

  • Robert M. McNab

    (Naval Postgraduate School)

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. We find that decentralization may positively influence price stability in developed countries, though this impact is much less clear in developing and transitional countries. We also find some evidence suggesting that decentralization may directly and negatively affect economic growth in higher-income countries but that this effect is reduced through the indirect positive impact of decentralization on growth through macroeconomic stability.

Suggested Citation

  • Jorge Martínez Vázquez & Robert M. McNab, 2006. "Fiscal decentralization, macrostability and growth," Hacienda Pública Española, IEF, vol. 179(4), pages 25-49, September.
  • Handle: RePEc:hpe:journl:y:2006:v:179:i:4:p:25-49
    as

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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Fiscal Decentralization; Economic Growth; and Macroeconomic Stability.;

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • O20 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - General
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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