IDEAS home Printed from https://ideas.repec.org/p/ekd/010027/10518.html
   My bibliography  Save this paper

Institutional and economic determinants of Sub-national public debt in Spain

Author

Listed:
  • Maria del Mar Delgado
  • Pablo Hernandez de Cos
  • Javier J. Pérez

Abstract

We analyze the evolution and the determinants of sub-sovereign public debt in Spain, focusing on regional governments' debt determinants, including of liabilities accounted for outside the extant definition of EDP public debt. Spain offers an interesting case study for a number of reasons. First, the country has witnessed successive waves of fiscal decentralization that have increased the amount of public services provided directly by sub-national governments together with increased fiscal co-responsibility (tax autonomy). Second, this decentralization process took place in a period in which a number of supra-national and national fiscal rules were put in place in the country. Third, while fiscal rules provide some explicit coordination among the different levels of government, there is also a high degree of market-imposed discipline, as most regional government's debt is regularly scrutinized by rating agencies. The empirical analysis is carried out using the available annual data for the period 1995-2015. The incidence of the different determinants on the changes in public debt will be tested by means of a standard econometric model. The estimation is carried out by the Generalized Method of Moments (Arellano and Bond, 1991), using as instruments lagged regressors as well a large number of control variables. The preliminary results show a strong presistency of regional debt. As expected the evolution of debt is reduced by the economic growth, as well as by the strength of fiscal rules. It doesn't seem to be affected by any of the political variables considered. Interest rates evolution seem to have a significant impact on debt, thus signalling that market discipline may be working. And finally, public companies debt doesn't seem to have a direct impact on debt evolution.

Suggested Citation

  • Maria del Mar Delgado & Pablo Hernandez de Cos & Javier J. Pérez, 2017. "Institutional and economic determinants of Sub-national public debt in Spain," EcoMod2017 10518, EcoMod.
    • Handle: RePEc:ekd:010027:10518
    as

    Download full text from publisher

    File URL: http://ecomod.net/system/files/Regional%20public%20debt%20in%20Spain_Mar%20Delgado.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Mark Mink & Jakob de Haan & Jakob de Haan, 2005. "Has the Stability and Growth Pact Impeded Political Budget Cycles in the European Union?," CESifo Working Paper Series 1532, CESifo.
    2. repec:bde:joures:v:04:y:2013:p:11 is not listed on IDEAS
    3. Núria Bosch & Albert Solé-Ollé, 2007. "Yardstick competition and the political costs of raising taxes: An empirical analysis of Spanish municipalities," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 14(1), pages 71-92, February.
    4. Morris, Richard & Schuknecht, Ludger, 2007. "Structural balances and revenue windfalls: the role of asset prices revisited," Working Paper Series 737, European Central Bank.
    5. Matteo Governatori & David Yim, 2012. "Fiscal Decentralisation and Fiscal Outcomes," European Economy - Economic Papers 2008 - 2015 468, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    6. Mar Delgado & Javier J. Pérez & Clara I. González, 2016. "Regional government access to market funding: international experience and recent developments," Economic Bulletin, Banco de España, issue FEB, pages 3-13, February.
    7. Dani Rodrik & Andres Velasco, 1999. "Short-Term Capital Flows," NBER Working Papers 7364, National Bureau of Economic Research, Inc.
    8. Pablo Simon-Cosano & Santiago Lago-Peñas & Alberto Vaquero, 2014. "On the Political Determinants of Intergovernmental Grants in Decentralized Countries: The Case of Spain," Publius: The Journal of Federalism, CSF Associates Inc., vol. 44(1), pages 135-156, January.
    9. Isabel Argimón & Pablo Hernández de Cos, 2012. "Fiscal Rules and Federalism as Determinants of Budget Performance," Public Finance Review, , vol. 40(1), pages 30-65, January.
    10. Otaviano Canuto & Lili Liu, 2013. "Until Debt Do Us Part : Subnational Debt, Insolvency, and Markets," World Bank Publications - Books, The World Bank Group, number 12597.
    11. Mr. Christian B. Mulder & Mr. Matthieu Bussière, 1999. "External Vulnerability in Emerging Market Economies: How High Liquidity Can Offset Weak Fundamentals and the Effects of Contagion," IMF Working Papers 1999/088, International Monetary Fund.
    12. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 58(2), pages 277-297.
    13. Pablo Hernández de Cos & Javier J. Pérez, 2013. "La nueva ley de estabilidad presupuestaria," Boletín Económico, Banco de España, issue APR, pages 65-78, Abril.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Mar Delgado-Téllez & Javier J. Pérez, 2020. "Institutional and Economic Determinants of Regional Public Debt in Spain," Public Finance Review, , vol. 48(2), pages 212-249, March.
    2. Padovano, Fabio & Petrarca, Ilaria, 2014. "Are the responsibility and yardstick competition hypotheses mutually consistent?," European Journal of Political Economy, Elsevier, vol. 34(C), pages 459-477.
    3. Mr. Daniel Leigh & Mr. Andrea Pescatori & Mr. Jaime Guajardo, 2011. "Expansionary Austerity New International Evidence," IMF Working Papers 2011/158, International Monetary Fund.
    4. Qian, Xingwang & Steiner, Andreas, 2017. "International reserves and the maturity of external debt," Journal of International Money and Finance, Elsevier, vol. 73(PB), pages 399-418.
    5. Marcelo Soto, 2000. "Capital Flows and Growth in Developing Countries: Recent Empirical Evidence," OECD Development Centre Working Papers 160, OECD Publishing.
    6. Ricardo Adrogué & Martin Cerisola & Gaston Gelos, 2010. "Brazil's long‐term growth performance: trying to explain the puzzle," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 37(4), pages 356-376, September.
    7. Salvador Barrios & Diego Martínez-López, 2017. "Fiscal equalization schemes and subcentral government borrowing," Chapters, in: Naoyuki Yoshino & Peter J. Morgan (ed.), Central and Local Government Relations in Asia, chapter 4, pages 130-160, Edward Elgar Publishing.
    8. Ramkishen S. Rajan, 2009. "Crises, Private Capital Flows and Financial Instability in Emerging Asia," MPDD Working Paper Series WP/09/06, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP).
    9. Nadia Doytch, 2022. "FDI: Hot or Cold Money? The Behaviour of Sectoral FDI Inflows and Outflows Over Periods of Growth Accelerations and Decelerations," Foreign Trade Review, , vol. 57(3), pages 324-350, August.
    10. Golinelli, Roberto & Momigliano, Sandro, 2006. "Real-time determinants of fiscal policies in the euro area," Journal of Policy Modeling, Elsevier, vol. 28(9), pages 943-964, December.
    11. Kayode Taiwo & Linda G. Veiga, 2020. "Is there an “invisible hand” in the formula-based intergovernmental transfers in Nigeria?," NIPE Working Papers 02/2020, NIPE - Universidade do Minho.
    12. Ms. Sweta Chaman Saxena & Meenakshi Rishi & Ms. Valerie Cerra, 2005. "Robbing the Riches: Capital Flight, Institutions, and Instability," IMF Working Papers 2005/199, International Monetary Fund.
    13. Stephen B. Kaplan & Kaj Thomsson, 2014. "The Political Economy of Sovereign Borrowing: Explaining the Policy Choices of Highly Indebted Governments," Working Papers 2014-10, The George Washington University, Institute for International Economic Policy.
    14. Brahim Gaies & Stéphane Goutte & Khaled Guesmi, 2019. "Does Financial Globalization Still Spur Growth In Emerging And Developing Countries? Considering Exchange Rate Volatility'S Effects," Working Papers hal-01968082, HAL.
    15. Agustín Molina†Parra & Diego Martínez†López, 2018. "Do Federal Deficits Motivate Regional Fiscal (Im)Balances? Evidence For The Spanish Case," Journal of Regional Science, Wiley Blackwell, vol. 58(1), pages 224-258, January.
    16. Merola, Rossana & Pérez, Javier J., 2013. "Fiscal forecast errors: Governments versus independent agencies?," European Journal of Political Economy, Elsevier, vol. 32(C), pages 285-299.
    17. International Monetary Fund, 2000. "Spillovers Through Banking Centers: A Panel Data Analysis," IMF Working Papers 2000/088, International Monetary Fund.
    18. Arias, Guillaume & Erlandsson, Ulf, 2004. "Regime switching as an alternative early warning system of currency crises - an application to South-East Asia," Working Papers 2004:11, Lund University, Department of Economics.
    19. Valerie Cerra & Meenakshi Rishi & Sweta Saxena, 2008. "Robbing the Riches: Capital Flight, Institutions and Debt," Journal of Development Studies, Taylor & Francis Journals, vol. 44(8), pages 1190-1213.
    20. Aida Caldera Sánchez & Filippo Gori, 2016. "Can Reforms Promoting Growth Increase Financial Fragility?: An Empirical Assessment," OECD Economics Department Working Papers 1340, OECD Publishing.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ekd:010027:10518. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Theresa Leary (email available below). General contact details of provider: https://edirc.repec.org/data/ecomoea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.