Local Governments’ Fiscal Balance, Privatization, and Banking Sector Reform in Transition Countries

Author/Editor:

Ernesto Crivelli

Publication Date:

June 1, 2012

Electronic Access:

Download PDF. Use the free Adobe Acrobat Reader to view this PDF file

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

Several transition economies have undertaken fiscal decentralization reforms over the past two decades along with liberalization, privatization, and stabilization reforms. Theory predicts that decentralization may aggravate fiscal imbalances, unless the right incentives are in place to promote fiscal discipline. This paper uses a panel of 20 transition countries over 19 years to address a central question of fact: Did privatization help to promote local governments’ fiscal discipline? The answer is clearly ‘no’ for privatization considered in isolation. However, privatization and subnational fiscal autonomy along with reforms to the banking system - restraining access to soft financing - may prove effective at improving fiscal balances among local governments.

Series:

Working Paper No. 12/146

Subject:

English

Publication Date:

June 1, 2012

ISBN/ISSN:

9781475504118/1018-5941

Stock No:

WPIEA2012146

Price:

$18.00 (Academic Rate:$18.00)

Format:

Paper

Pages:

27

Please address any questions about this title to publications@imf.org