Impact of Fiscal Decentralization on Fiscal Stance in EU: Real Deal or Econometric Illusion?
Siniša Mali () and
Lenka MaliCká ()
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Siniša Mali: Technical University of Košice
Lenka MaliCká: Technical University of Košice
Hacienda Pública Española / Review of Public Economics, 2023, vol. 246, issue 3, 71-99
Abstract:
This paper aims to examine how cyclically-adjusted primary balance (CAPB) in EU countries responded to the expenditure and tax decentralization. We contribute to the literature by three important conclusions. First, estimation results indicate that CAPB positively responded to expenditure decentralization, and negatively responded to tax decentralization. Second, fiscal decentralization seems to be driven by the determinants exogenous to primary balance. Third, variables deemed as the “good” instruments in the existing literature fail to explain within variations of the fiscal decentralization indicators. We hypothesized that negative impact of tax decentralization on the primary balance is transmitted through the government revenues, but further research is needed to resolve this puzzle
Keywords: Fiscal decentralization; Fiscal reaction function; Fiscal stance; EU. (search for similar items in EconPapers)
JEL-codes: H60 H71 H72 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:hpe:journl:y:2023:v:246:i:3:p:71-99
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