A FRAMEWORK FOR ANALYZING THE IMPACT OF FISCAL DECENTRALIZATION ON MACROECONOMIC PERFORMANCE, GOVERNANCE AND ECONOMIC GROWTH

Umaima Arif and Eatzaz Ahmad ()
Additional contact information
Umaima Arif: Economics Department, Quaid-i-Azam University Islamabad, Islamabad, Pakistan
Eatzaz Ahmad: Economics Department, Quaid-i-Azam University Islamabad, Islamabad, Pakistan

The Singapore Economic Review (SER), 2020, vol. 65, issue 01, 3-39

Abstract: This study analyzes the direct impact of fiscal decentralization on economic growth and broadens the scope of assessment by examining the indirect impact of fiscal decentralization on economic growth via its impact on macroeconomic performance and quality of governance institutions. The study uses a panel data set of 53 developed and developing countries over the period of 1996–2014. The empirical findings show that the indirect impact, rather than the direct impact of fiscal decentralization on growth, that is, the effect of decentralization on economic growth through its effect on macroeconomic performance and quality of governance institutions significantly matters for growth. Further, the results show that fiscal decentralization is growth enhancing when supported by stable macroeconomic performance in terms of stability in prices, budget deficit and exchange rate. The effect of fiscal decentralization on per capita gross domestic product (GDP) growth rate is positive when it is complemented by sound institutional structure in terms of rule of law, low corruption in government institutions, high-bureaucratic quality and democratic accountability. All these conclusions hold for developed as well as for developing countries.

Keywords: Fiscal decentralization; growth; macroeconomic performance; governance; public policy (search for similar items in EconPapers)
Date: 2020
References: Add references at CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.worldscientific.com/doi/abs/10.1142/S0217590818500194
Access to full text is restricted to subscribers

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: https://EconPapers.repec.org/RePEc:wsi:serxxx:v:65:y:2020:i:01:n:s0217590818500194

Ordering information: This journal article can be ordered from

DOI: 10.1142/S0217590818500194

Access Statistics for this article

The Singapore Economic Review (SER) is currently edited by Euston Quah

More articles in The Singapore Economic Review (SER) from World Scientific Publishing Co. Pte. Ltd.
Bibliographic data for series maintained by Tai Tone Lim ().