The effect of sub-national borrowing control on fiscal sustainability: How to regulate?
This article examines effectiveness of sub-national borrowing control regimes in maintaining overall fiscal sustainability. The results suggest that regulating sub-national borrowing based on fiscal rules performs most efficiently in maintaining fiscal consolidation. Furthermore, sole reliance on financial markets seems to lead to faster end of fiscal consolidation episodes, which may be explained by not fully developed financial markets in many countries that dominantly apply this approach, Finally, strong central government control, as in case of administrative and cooperative regimes, in presence of high fiscal dependence on central government financing seem to increase the probability of ending consolidation episodes.
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- Fernando Toboso, 2006. "Key organisational choices for financing regional governments in democratic Spain," Revista de Analisis Economico – Economic Analysis Review, Ilades-Georgetown University, Universidad Alberto Hurtado/School of Economics and Bussines, vol. 21(2), pages 61-81, December.
- de Mello, Luiz Jr, 2000. "Fiscal Decentralization and Intergovernmental Fiscal Relations: A Cross-Country Analysis," World Development, Elsevier, vol. 28(2), pages 365-380, February.
- Freinkman, Lev & Yossifov, Plamen, 1999. "Decentralization in regional fiscal systems in Russia - trends and links to economic performance," Policy Research Working Paper Series 2100, The World Bank.
- de Mello, Luiz, 2006. "Fiscal responsibility legislation and fiscal adjustment : the case of Brazilian local governments," Policy Research Working Paper Series 3812, The World Bank.
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