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How Should Subnational Government Borrowing Be Regulated? Some Cross-Country Empirical Evidence

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  • Mr. Alexander Plekhanov
  • Mr. Raju J Singh

Abstract

Countries have adopted various institutional responses to subnational government borrowing. Using a sample of 44 countries 1982-2000, this paper provides a panel data analysis to determine the most effective borrowing constraints for containing local fiscal deficits. The results suggest that no single institutional arrangement is superior under all circumstances. The appropriateness of specific arrangements depends upon other institutional characteristics, particularly the degree of vertical fiscal imbalance, the existence of any bailout precedent, and the quality of fiscal reporting.

Suggested Citation

  • Mr. Alexander Plekhanov & Mr. Raju J Singh, 2005. "How Should Subnational Government Borrowing Be Regulated? Some Cross-Country Empirical Evidence," IMF Working Papers 2005/054, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2005/054
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    References listed on IDEAS

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    1. Johansson, Eva, 2003. "Intergovernmental grants as a tactical instrument: empirical evidence from Swedish municipalities," Journal of Public Economics, Elsevier, vol. 87(5-6), pages 883-915, May.
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    More about this item

    Keywords

    WP; government;

    JEL classification:

    • H74 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Borrowing
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism

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