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Fiscal Decentralization,Macrostability, and Growth (2005)

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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File URL: http://icepp.gsu.edu/files/2017/09/ispwp-0506.pdf
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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
Handle: RePEc:ays:ispwps:paper0506
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