Fiscal Decentralization and Fiscal Policy Performance

Author/Editor:

Moussé Sow ; Ivohasina F Razafimahefa

Publication Date:

March 24, 2017

Electronic Access:

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

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary:

This paper explores the impact of fiscal decentralization on fiscal policy performance in a large sample of advanced and developing economies. The findings suggest that a larger share of decentralized expenditure is associated with a stronger fiscal balance; however, fiscal decentralization can lead to more pro-cyclical fiscal policy. Thus, the design and pace of fiscal decentralization need to be tailored to the specificities of the economy. Countries that have already established strong accountablity and budget management capacity at the local level can benefit from fiscal decentralization. In contrast, in economies prone to large volatility from internal and external shocks, the central government may need to retain a sufficient share of expenditure and revenue to conduct counter-cyclical policies. Finally, the pace of expenditure and revenue decentralization should be aligned.

Series:

Working Paper No. 17/64

Subject:

English

Publication Date:

March 24, 2017

ISBN/ISSN:

9781475588606/1018-5941

Stock No:

WPIEA2017064

Price:

$18.00 (Academic Rate:$18.00)

Format:

Paper

Pages:

29

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