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Policy Coordination in Fiscal Federalism; Drawing Lessons From the Dubai Debt Crisis

  • Serhan Cevik

Using the cyclically adjusted non-hydrocarbon primary balance, this paper investigates the evolution of the fiscal policy stance in the United Arab Emirates at consolidated and sub-national levels in the run-up and after the crisis. The empirical findings show that procyclical fiscal policies prior to the crisis reinforced the financial sector cycle, exacerbated the economic upswing, and thereby contributed to the build-up of macro-financial vulnerabilities. The paper also sets out policy lessons to develop a rule-based fiscal framework that would help strengthen fiscal policy coordination between the various layers of government and ensure long-term fiscal sustainability and a more equitable intergenerational distribution of wealth.

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Paper provided by International Monetary Fund in its series IMF Working Papers with number 11/147.

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Length: 23
Date of creation: 01 Jun 2011
Date of revision:
Handle: RePEc:imf:imfwpa:11/147
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  1. Charles M. Tiebout, 1956. "A Pure Theory of Local Expenditures," Journal of Political Economy, University of Chicago Press, vol. 64, pages 416.
  2. Tanzi, Vito, 2008. "The future of fiscal federalism," European Journal of Political Economy, Elsevier, vol. 24(3), pages 705-712, September.
  3. Morten O. Ravn & Harald Uhlig, 2002. "On adjusting the Hodrick-Prescott filter for the frequency of observations," The Review of Economics and Statistics, MIT Press, vol. 84(2), pages 371-375.
  4. International Monetary Fund, 2011. "How Strong Are Fiscal Multipliers in the GCC? An Empirical Investigation," IMF Working Papers 11/61, International Monetary Fund.
  5. Arturo Galindo & Carlos Scartascini & J. Mark Payne & Robert Daughters & Alberto Melo & Koldo Echebarría & Eduardo Lora & Gabriel Filc & Alejandro Micco & Alberto E. Chong & Ugo Panizza & Juan Benavid, 2007. "The State of State Reform in Latin America," IDB Publications (Books), Inter-American Development Bank, number 59578 edited by Eduardo Lora.
  6. repec:idb:brikps:59578 is not listed on IDEAS
  7. Ernesto Crivelli & Klaas Staal, 2006. "Size and Soft Budget Constraints," CESifo Working Paper Series 1858, CESifo Group Munich.
  8. David E. Wildasin, 2001. "Externalities and Bailouts: Hard and Soft Budget Constraints in Intergovernmental Fiscal Relations," Public Economics 0112002, EconWPA.
  9. Tanzi, Vito, 2008. "The future of fiscal federalism," Discussion Papers, Research Unit: Market Processes and Governance SP II 2008-03, Social Science Research Center Berlin (WZB).
  10. Eduardo Lora, 2007. "The State of State Reform in Latin America," World Bank Publications, The World Bank, number 6642, September.
  11. Gary Woller & Kerk Phillips, 1998. "Fiscal decentralisation and IDC economic growth: An empirical investigation," Journal of Development Studies, Taylor & Francis Journals, vol. 34(4), pages 139-148.
  12. Andr�s Rodr�guez-Pose & Adala Bwire, 2004. "The economic (in)efficiency of devolution," Environment and Planning A, Pion Ltd, London, vol. 36(11), pages 1907-1928, November.
  13. Thushyanthan Baskaran & Lars P. Feld, 2009. "Fiscal Decentralization and Economic Growth in OECD Countries: Is there a Relationship?," CESifo Working Paper Series 2721, CESifo Group Munich.
  14. International Monetary Fund, 2010. "The Cyclicality of Fiscal Policy in the Middle East and Central Asia:Is the Current Crisis Different?," IMF Working Papers 10/68, International Monetary Fund.
  15. Teresa Ter-Minassian, 2006. "Fiscal Rules for Subnational Governments: Can They Promote Fiscal Discipline?," OECD Journal on Budgeting, OECD Publishing, vol. 6(3), pages 1-11.
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