Economics at your fingertips  

Intergovernmental Transfers: Are they pro- or counter-cyclical?

Hansjörg Blöchliger and Balázs Égert

ECONOMIA PUBBLICA, 2017, vol. 2017/3, issue 3, 5-20

Abstract: This note describes an empirical analysis to measure the cyclical properties of intergovernmental transfers. By modelling a fiscal policy reaction function, the paper tests whether transfers systems in 25 member countries of the Organisation for Economic Co-operation and Development (OECD) are pro-or counter-cyclical, i.e. whether they offset cyclical fluctuations of sub-central economies or, on the contrary, exacerbate them. Regression results suggest that transfer systems tend to be pro-cyclical in general and in more than half of OECD countries and tend to destabilise sub-central economies. Pro-cyclical grants hence often exacerbate the pro-cyclicality of sub-central fiscal policy. Transfer pro-cyclicality may be the result of several factors: Transfer spending is often a fixed share of central government tax revenue which itself tends to be pro-cyclical. Moreover, many grants are matching sub-central spending and hence tend to increase when sub-central spending rises. Finally, reform proposals are presented to make transfer systems less cyclical and more stabilising.

JEL-codes: H42 H50 H77 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link) ... 485&Tipo=ArticoloPDF (text/html)
Single articles can be downloaded buying download credits, for info:

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Ordering information: This journal article can be ordered from
http://www.francoang ... ti.aspx?startCode=DC

Access Statistics for this article

ECONOMIA PUBBLICA is currently edited by FrancoAngeli

More articles in ECONOMIA PUBBLICA from FrancoAngeli Editore
Bibliographic data for series maintained by Angelo Ventriglia ().

Page updated 2020-07-06
Handle: RePEc:fan:epepep:v:html10.3280/ep2017-003001