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

June 1, 2012

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Ernesto Crivelli. Local Governments’ Fiscal Balance, Privatization, and Banking Sector Reform in Transition Countries, (USA: International Monetary Fund, 2012) accessed September 19, 2024

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.

Subject: Budget planning and preparation, Commercial banks, Economic sectors, Financial institutions, Government asset and liability management, Privatization, Public enterprises, Public financial management (PFM)

Keywords: Banking sector reform, Budget balance, Budget planning and preparation, Central and Eastern Europe, Commercial banks, Eastern Europe, FA x privatization, Fiscal decentralization, Government, Government asset and liability management, Has privatization, Local government, Local government expenditure, Privatization, Public enterprises, Soft budget constraints, Transition, Transition country, WP

Publication Details

Pages:

27
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2012/146
Stock No:

WPIEA2012146
ISBN:

9781475504118
ISSN:

1018-5941

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