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Designing Sound Fiscal Relations Across Government Levels in Decentralized Countries

Author

Listed:
  • Robin Boadway
  • Mr. Luc Eyraud

Abstract

This paper discusses how decentralized countries can achieve sound fiscal relations between the central government and lower government levels. The concepts of “vertical gap” and “vertical balance” provide an analytical framework for identifying and addressing key challenges. These concepts can help policymakers ensure that the financing of subnational governments (composed of transfers received from the center, own revenues, and borrowing) is both efficient and adequate given the allocation of spending responsibilities. More generally, the paper offers some perspectives about the optimal design of decentralization systems by examining the sequencing and economic principles underlying revenue and expenditure assignments, the use of transfers, and borrowing.

Suggested Citation

  • Robin Boadway & Mr. Luc Eyraud, 2018. "Designing Sound Fiscal Relations Across Government Levels in Decentralized Countries," IMF Working Papers 2018/271, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2018/271
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    File URL: http://www.imf.org/external/pubs/cat/longres.aspx?sk=46425
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    References listed on IDEAS

    as
    1. James M. Buchanan, 1952. "Federal Grants and Resource Allocation: A Reply," Journal of Political Economy, University of Chicago Press, vol. 60, pages 536-536.
    2. Mrs. Teresa Ter-Minassian, 1997. "Decentralization and Macroeconomic Management," IMF Working Papers 1997/155, International Monetary Fund.
    3. Wallace E. Oates, 2006. "On the Theory and Practice of Fiscal Decentralization," Working Papers 2006-05, University of Kentucky, Institute for Federalism and Intergovernmental Relations.
    4. Miss Candice Y Liu & Ms. Mercedes Garcia-Escribano, 2017. "Expenditure Assessment Tool," IMF Technical Notes and Manuals 2017/006, International Monetary Fund.
    5. Robin Boadway & Anwar Shah, 2007. "Intergovernmental Fiscal Transfers : Principles and Practice," World Bank Publications - Books, The World Bank Group, number 7171, December.
    6. Ms. Suzanne Flynn & Mario Pessoa, 2014. "Prevention and Management of Government Arrears," IMF Technical Notes and Manuals 2014/003, International Monetary Fund.
    7. Suzanne Flynn & Mario Pessoa, 2014. "Prevention and Management of Government Arrears," IMF Technical Notes and Manuals 14/03, International Monetary Fund.
    8. James M. Buchanan, 1952. "Federal Grants and Resource Allocation," Journal of Political Economy, University of Chicago Press, vol. 60, pages 208-208.
    9. Eyraud, Luc & Lusinyan, Lusine, 2013. "Vertical fiscal imbalances and fiscal performance in advanced economies," Journal of Monetary Economics, Elsevier, vol. 60(5), pages 571-587.
    10. Candice Y Liu & Mercedes Garcia-Escribano, 2017. "Expenditure Assessment Tool," IMF Technical Notes and Manuals 17/06, International Monetary Fund.
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    Citations

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    Cited by:

    1. Boris I. Alekhin, 2020. "Regional Tax Autonomy and Budget Balances," Finansovyj žhurnal — Financial Journal, Financial Research Institute, Moscow 125375, Russia, issue 5, pages 114-127, October.
    2. Boris I. Alekhin, 2020. "Vertical Fiscal Imbalance and Regional Economic Growth," Finansovyj žhurnal — Financial Journal, Financial Research Institute, Moscow 125375, Russia, issue 6, pages 39-53, December.
    3. Krasnopeeva, Natalia, 2023. "Revenues and expenditures of Russian regional budgets: Granger causality analysis," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 70, pages 5-33.

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