The French Regions Borrowing Behaviours. How heterogeneous are they?

G. Dufr not, P. Frout and Christophe Schalck
Authors registered in the RePEc Author Service: Philippe Froute and Gilles Dufrénot ()

Working papers from Banque de France

Abstract: This paper provides empirical evidence of the heterogeneous borrowing behaviours of French regions, despite a common accountability constraint that forces them to balance their budget and to borrow only to finance investment expenditure (golden rule). To this end, we use a quantile regression analysis covering the period from 1999 to 2007. The heterogeneity is very pronounced when the regions face a negative shock on debt, for instance a tightening of financial conditions. We explain our findings as a consequence of the fact that the Golden rule can be thought of as a soft rule if some local administrations believe that a financial rescue from the central government is automatic (as the regions receive transfers from the later). In this case, some regions find it advantageous to consider borrowing as an adjustment variable when taking their budgetary decisions.

Keywords: Regional Borrowing; Quantile Regressions; Golden Rule. (search for similar items in EconPapers)
JEL-codes: E62 H74 K34 R5 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2010
New Economics Papers: this item is included in nep-geo and nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:bfr:banfra:289

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