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Subnational Debt, Insolvency, and Market Development

Author

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  • Otaviano Canuto
  • Lili Liu

Abstract

State and local debt and the debt of quasi-public agencies have grown in importance as a result of fiscal decentralization, rapid urbanization, and the increasing role played by private capital. However, with debt comes the risk of insolvency. This note outlines a set of aligned fiscal incentives that should be in place, as well as the design issues to be considered in debt restructuring frameworks. Drawing on Canuto and Liu (2013), this note also suggests some broad lessons extracted from several country experiences with subnational debt restructuring, insolvency frameworks, and debt market development.
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Suggested Citation

  • Otaviano Canuto & Lili Liu, 2013. "Subnational Debt, Insolvency, and Market Development," World Bank Publications - Reports 17023, The World Bank Group.
    • Handle: RePEc:wbk:wboper:17023
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    References listed on IDEAS

    as
    1. Mariano Tommasi & Miguel Braun, 2002. "Fiscal Rules for Subnational Governments. Some Organizing Principles and Latin American Experiences," Working Papers 44, Universidad de San Andres, Departamento de Economia, revised Mar 2002.
    2. Ianchovichina, Elena & Liu, Lili & Nagarajan, Mohan, 2006. "Subnational fiscal sustainability analysis : what can we learn from Tamil Nadu ?," Policy Research Working Paper Series 3947, The World Bank.
    3. Liu, Lili & Webb, Steven B., 2011. "Laws for fiscal responsibility for subnational discipline : international experience," Policy Research Working Paper Series 5587, The World Bank.
    4. Wallis, John Joseph, 2005. "Constitutions, Corporations, and Corruption: American States and Constitutional Change, 1842 to 1852," The Journal of Economic History, Cambridge University Press, vol. 65(1), pages 211-256, March.
    5. Canuto, Otaviano & Liu, Lili, 2010. "Subnational Debt Finance and the Global Financial Crisis," World Bank - Economic Premise, The World Bank, issue 13, pages 1-7, May.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Ugo Panizza & Andrew Powell, 2023. "Reducing Public Debt: What Works Best?," IDB Publications (Book Chapters), in: Andrew Powell & Oscar Mauricio Valencia (ed.), Dealing with Debt, edition 1, chapter 9, pages 197-222, Inter-American Development Bank.
    2. Eduardo Cavallo & Eduardo Fernández Arias, 2023. "Strong External Balance Sheets for Resilient Economies," IDB Publications (Book Chapters), in: Andrew Powell & Oscar Mauricio Valencia (ed.), Dealing with Debt, edition 1, chapter 2, pages 5-36, Inter-American Development Bank.
    3. João Ayres & Anna Gelpern & Andrew Powell, 2023. "Sovereign Debt Restructuring: In Need of a New Approach," IDB Publications (Book Chapters), in: Andrew Powell & Oscar Mauricio Valencia (ed.), Dealing with Debt, edition 1, chapter 10, pages 223-254, Inter-American Development Bank.
    4. Leandro Andrián & Oscar Mauricio Valencia, 2023. "Past the Tipping Point? Assessing Debt Overhang in Latin America and the Caribbean," IDB Publications (Book Chapters), in: Andrew Powell & Oscar Mauricio Valencia (ed.), Dealing with Debt, edition 1, chapter 8, pages 183-196, Inter-American Development Bank.
    5. María Cecilia Acevedo & Leandro Andrián & Victoria Nuguer & Oscar Mauricio Valencia, 2023. "Understanding the Rise in Debt," IDB Publications (Book Chapters), in: Andrew Powell & Oscar Mauricio Valencia (ed.), Dealing with Debt, edition 1, chapter 4, pages 67-94, Inter-American Development Bank.
    6. Andrew Powell & Oscar Mauricio Valencia, 2023. "The Bottom Line on Debt," IDB Publications (Book Chapters), in: Andrew Powell & Oscar Mauricio Valencia (ed.), Dealing with Debt, edition 1, chapter 13, pages 309-318, Inter-American Development Bank.
    7. María Cecilia Acevedo & Vanessa Alviarez & Joaquin Lennon Sabatini, 2023. "Managing Private Debt," IDB Publications (Book Chapters), in: Andrew Powell & Oscar Mauricio Valencia (ed.), Dealing with Debt, edition 1, chapter 11, pages 255-284, Inter-American Development Bank.
    8. Leopoldo Avellán & Arturo Galindo & Giulia Lotti, 2023. "Official Creditors: Providing More than Money," IDB Publications (Book Chapters), in: Andrew Powell & Oscar Mauricio Valencia (ed.), Dealing with Debt, edition 1, chapter 7, pages 161-182, Inter-American Development Bank.
    9. Juan Manuel Hernández & Andrew Powell & Oscar Mauricio Valencia, 2023. "Debt Sustainability: More Important than Ever," IDB Publications (Book Chapters), in: Andrew Powell & Oscar Mauricio Valencia (ed.), Dealing with Debt, edition 1, chapter 5, pages 95-122, Inter-American Development Bank.
    10. Andrew Powell & Oscar Mauricio Valencia, 2023. "The Debt Conundrum," IDB Publications (Book Chapters), in: Andrew Powell & Oscar Mauricio Valencia (ed.), Dealing with Debt, edition 1, chapter 1, pages 1-4, Inter-American Development Bank.
    11. Rodrigo Heresi & Andrew Powell, 2023. "Balance Sheet Vulnerabilities in the Wake of the Pandemic," IDB Publications (Book Chapters), in: Andrew Powell & Oscar Mauricio Valencia (ed.), Dealing with Debt, edition 1, chapter 12, pages 285-308, Inter-American Development Bank.
    12. Eduardo Borensztein & Eduardo Cavallo, 2023. "Domestic Bond Markets: Successes and Challenges," IDB Publications (Book Chapters), in: Andrew Powell & Oscar Mauricio Valencia (ed.), Dealing with Debt, edition 1, chapter 3, pages 37-66, Inter-American Development Bank.
    13. Eduardo Levy Yeyati & Andrew Powell, 2023. "Sovereign Debt Management," IDB Publications (Book Chapters), in: Andrew Powell & Oscar Mauricio Valencia (ed.), Dealing with Debt, edition 1, chapter 6, pages 123-160, Inter-American Development Bank.
    14. Powell, Andrew & Valencia, Oscar, 2023. "Dealing with Debt: Less Risk for More Growth in Latin America and the Caribbean," IDB Publications (Books), Inter-American Development Bank, number 12664, December.

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    More about this item

    Keywords

    Macroeconomics and Economic Growth - Subnational Economic Development Finance and Financial Sector Development - Debt Markets International Economics and Trade - External Debt Finance and Financial Sector Development - Access to Finance Finance and Financial Sector Development - Bankruptcy and Resolution of Financial Distress;

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H5 - Public Economics - - National Government Expenditures and Related Policies
    • H6 - Public Economics - - National Budget, Deficit, and Debt
    • H7 - Public Economics - - State and Local Government; Intergovernmental Relations
    • R1 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics

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