How well do subnational borrowing regulations work?

Jorge Martinez-Vazquez () and Violeta Vulovic

Chapter 5 in Central and Local Government Relations in Asia, 2017, pp 161-220 from Edward Elgar Publishing

Abstract: There are many positive aspects associated with subnational borrowing, including additional funding and promoting intergenerational equity. However, it may also endanger fiscal sustainability and macro stability due to moral hazard and soft budget constraints, making borrowing controls justified and common. This chapter reviews the different types of ex ante and ex post subnational borrowing regulations used in the international experience based on a large panel of developed and developing countries. Each type of regulation has advantages and disadvantages, with varying suitability to a country’s circumstances. It is found that the presence of subnational tax autonomy contributes to an increase in the general government primary balance but not significantly for subnational primary balances. A history of subnational bailouts is associated with lower primary balances, on average, at all levels. The ‘golden rule’ and limits on debt and borrowing appear effective at all levels of government. However, none of the broad types of subnational borrowing regulations seem to have a distinct significant direct effect on the narrow definition of fiscal sustainability at the subnational level.

Keywords: Asian Studies; Development Studies; Economics and Finance (search for similar items in EconPapers)
Date: 2017
References: Add references at CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
https://www.elgaronline.com/view/9781786436863.00013.xml (application/pdf)
Our link check indicates that this URL is bad, the error code is: 503 Service Temporarily Unavailable

Related works:
Working Paper: How Well Do Subnational Borrowing Regulations Work? (2016)
Working Paper: How Well Do Subnational Borrowing Regulations Work? (2016)
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:elg:eechap:17640_5

Ordering information: This item can be ordered from
http://www.e-elgar.com

Access Statistics for this chapter

More chapters in Chapters from Edward Elgar Publishing
Bibliographic data for series maintained by Darrel McCalla ().