Fiscal Decentralisation and Local Economic Growth: Evidence from a Fiscal Reform in China

This paper uses a fiscal decentralisation reform in China – namely, the province‐managing‐county (PMC) reform – to examine the effects of fiscal decentralisation on local economic growth. The PMC reform abolished the subordinate fiscal relationship between prefectures and counties and transferred much of the tax and spending authority from the prefecture to the county level. Exploiting a county‐level panel data set over 2001–11, we find that the reform has led to a significant increase in the GDP growth rate. The effect is considerably more pronounced in regions with superior initial institutional quality. We also identify channels: the PMC reform induced county governments to exert lower tax burdens on firms and increase spending on infrastructure construction.     

Fiscal Forecasting: Lessons from the Literature and Challenges*

While fiscal forecasting and monitoring has its roots in the accountability of governments for the use of public funds in democracies, the Stability and Growth Pact has significantly increased interest in budgetary forecasts in Europe, where they play a key role in EU multilateral budgetary surveillance. In view of the increased prominence and sensitivity of budgetary forecasts, which may lead to them being influenced by strategic and political factors, this paper discusses the main issues and challenges in the field of fiscal forecasting from a practitioner's perspective and places them in the context of the related literature.     

Fiscal Transfers and Fiscal Sustainability

We examine whether the U.S. and German state governments pursue sustainable fiscal policies taking into account fiscal transfers. Using panel data techniques we investigate whether the debt‐to‐GDP ratio had a positive influence on the primary surplus (Bohn model). We show that including/excluding fiscal transfers changes the results. If fiscal transfers are not included in the primary surplus, the test results do not indicate that the U.S. and German state governments pursued sustainable fiscal policies. Our results also suggest that fiscal transfers were positively related to debt. These findings indicate that intergovernmental transfers have implicitly subsidized debts.     

Local fiscal equalisation based on fiscal capacity: the case of Austria

This paper deals with local fiscal equalisation in Austria. The system of intergovernmental relations in Austria includes different regulations in order to equalise differences in the fiscal capacity of the municipalities. This leads to so‐called ‘compensation effects’, because additional revenues from a local government's own tax are (at least partly) compensated by losses from equalisation grants. This paper carries out a detailed analysis of these compensation effects. It is shown that they create strong fiscal disincentives for the local governments: on average, 55 per cent of additional revenues from the communal tax (which is the most important of a local government's own taxes) are compensated by losses of equalisation grants. In extreme cases, local governments can lose up to 144 per cent of the additional tax yields collected. These local governments would be better off if they made no effort to increase their tax base.     

财政赤字的风险损益分析

财政赤字风险将引起收入分配不公 ,降低资本的效率和减少储蓄 ,危害物价稳定 ,引起各经济主体对赤字的路径依赖并损害经济增长的质量和可持续性。但财政赤字也会带来经济增长和经济结构优化的风险收益。评价和选择财政赤字政策时 ,必须比较赤字的风险收益和风险损失 ,以获取财政赤字风险净收益最大化。     

Fiscal Decentralisation and Empowerment: Evolving Concepts and Alternative Measures*

Decentralisation reforms are among the most common and significant public sector reforms, particularly in developing and transitional countries around the world. Despite the importance of the topic to policy practitioners and academic researchers alike and the extensive empirical research on the topic, there is consensus in the literature that the measures of decentralisation that are currently used are unsatisfactory. In response, we propose an alternative measure of fiscal decentralisation based on the notion that decentralisation is more than simply the inverse of centralisation. Following Bahl (2005), we consider fiscal decentralisation as ‘the empowerment of people by the [fiscal] empowerment of their local governments’. Accordingly, we develop a measure of fiscal empowerment that allows us to quantify fiscal decentralisation as the gain in empowerment due to devolution and we analyse the proposed measures of empowerment and decentralisation for a cross‐section of developing, transitional and industrialised countries.     

社会保险基金预算管理中的政府理财责任

编制社会保险基金预算是政府介入社会保险事务,统筹安排社会保险基金供求,规范社会保险基金管理的重要工具。政府理财则是市场经济条件下优化公共财政资源配置,确保达成社会保险基金预算目标的重要路径。社会保险基金支出刚性很强且难以预测,实现基金预算收支平衡、适度结余对政府理财能力与理财水平充满挑战。     

Fiscal Consolidation and Decentralisation: A Tale of Two Tiers*

This paper contributes to the established literature on fiscal consolidations by investigating the distinct behaviour of central and sub‐central tiers of government during general government consolidation attempts. In the light of different degrees of decentralisation across OECD countries, and the different responsibilities devolved to sub‐central tiers, we believe that this approach offers an illuminating insight into the analysis of fiscal consolidations and their success. We show that the involvement of the sub‐central tiers of government is crucial to achieving cuts in expenditure, particularly in relation to the overall size of the government wage bill. In addition, central governments appear to exert a strong influence on the expenditure of sub‐central tiers through their grant allocations, and control of these allocations appears to have a considerable impact upon the overall success of consolidation attempts. Finally, we demonstrate that there is a skewness in cuts towards sub‐central capital expenditure both when central governments cut grant allocations and when sub‐central governments engage in lone consolidation attempts.     

Geographic Cross-Sectional Fiscal Spending Multipliers and the Role of Local Autonomy: Evidence from European Regions

Using a panel of 268 European regions during 1990–2014, we document that the degree of local government's autonomy, measured with the “Local Autonomy Index,” has a significant positive effect on the fiscal spending multiplier. The estimated geographic cross-sectional fiscal spending multiplier is on average close to zero in countries with the lowest degree of local autonomy, and around unity in countries with the highest degree of local autonomy. Multipliers are state-dependent: larger when gross domestic product is below trend and when there is slack in the labor market; in those states, local autonomy has a particularly large positive effect on the multiplier. To interpret the empirical findings, we build a Dynamic Stochastic General Equilibrium (DSGE) model where both local and central government spending contribute to a public good that enhances private labor productivity. Local governments are more efficient in producing the public good and the multiplier is higher in countries where local government spending has a larger share in the production of the public good.     

US Fiscal Sustainability and the Causality Relationship between Government Expenditures and Revenues: A New Approach Based on Quantile Cointegration

This paper first aims to reinvestigate the issue of US fiscal sustainability by using the quantile cointegration approach proposed by Xiao (2009 and 2012). Our empirical evidence indicates a quantile‐dependent cointegrating relationship between government expenditures and revenues. In addition, this paper examines the long‐run causality relationship between expenditures and revenues by using the vector error‐correction (VEC) model with coefficients based on the different quantiles. Findings from the long‐run Granger‐causality analyses support the spend‐and‐tax hypothesis. Our investigation suggests that the government should show more discretion in increasing expenditures in the long run. Moreover, budget deficit reduction can only be achieved through reductions in government expenditures.     

Fiscal Policy Shocks in the Euro Area and the US: An Empirical Assessment*

We analyse the impact of fiscal policy shocks in the euro area as a whole, using a newly‐available quarterly data set of fiscal variables for the period 1981–2007. To allow for comparability with previous results on euro‐area countries and the US, we use a standard structural vector autoregressive (VAR) framework, and study the impact of aggregated and disaggregated government spending and net‐tax shocks. In addition, to frame euro‐area results, we apply the same methodology for the same sample period to US data. We also explore the sensitivity of the results to the inclusion of variables aiming to control for underlying financial and fiscal conditions. The main new findings are that: expansionary fiscal shocks have a short‐term positive impact on GDP and private consumption, with government spending shocks entailing, in general, higher effects on economic activity than (net) tax reductions; output multipliers to government expenditure shocks are of similar size in the euro area and in the US; the persistence of a fiscal spending shock is higher in the US than in the euro area, which appears to be related to military spending in the US; and fiscal multipliers have increased over the recent past in both geographical areas.     

The Fiscal Decentralisation and Economic Growth Nexus Revisited

This paper addresses two challenges that the fiscal decentralisation and economic growth nexus faces – namely, endogeneity problems and inaccurate measurement of fiscal decentralisation. We introduce novel instrumental variables based on common legal system origin, common federal system, geographical position and relative country size. The positive relationship between fiscal decentralisation and economic growth that we find remains valid when using these instrumental variables. Using fiscal decentralisation measures that better reflect the autonomy of subnational governments changes this relationship. This finding, however, is the result of the accompanying changes in the sample rather than the use of these alternative measures themselves.     

减税降费背景下预算监督的逻辑进路与实现路径

以制度变革方式实施的普惠性、实质性减税降费,不仅有助于最大限度地以支定收保护国民的利益,更会倒逼形成预算的刚性约束,有助于促进国家预算监督体系的完善,真正实现量入为出。减税降费背景下强化预算监督,应重塑预算监督理念,重构预算监督机制,完善预算监督路径,建立健全党委、人大、公众以及司法的协同预算监督体制,拓展多元主体参与预算监督、优化预算监督有效性、威慑性的路径,构建国家财政权与国民财产权之间的良性取予关系。     

Intergovernmental Fiscal Transfers and Local Incentives and Responses: The Case of Indonesia

Indonesian policymakers are convinced that a number of perverse incentives are embedded in their system of intergovernmental transfers. Officials in countries throughout the developing world have similar views about their own intergovernmental frameworks. In Indonesia, perverse incentives are thought to negatively influence a wide range of local government fiscal behaviours, including as regards own‐source revenues, spending and savings. An empirical analysis of the local government response to transfers, however, offers only mixed support for the existence and strength of the presumed incentives. Overall, the findings in this paper highlight the benefits to central governments of rigorously examining assumed perverse incentives in their intergovernmental frameworks before embarking on attempts to expunge them.     

Interaction of Government Tiers and Central Banks in a Federation: An Empirical Test

Fiscal rules are necessary to protect monetary policy from the consequences of unsustainable or active fiscal policy for inflation. Monetary unions, such as the Economic and Monetary Union (EMU), require even stronger fiscal rules to avoid free riding by regional fiscal authorities on the common monetary policy. By contrast, in a fiscal federation, the federal government internalises the effect of active regional policies on the overall price level. Federal fiscal policy contributes to price stability either by enforcing fiscal rules or by adjusting its own stance. Following Canzoneri, Cumby and Diba (2001), we test whether federal and regional governments in Germany behave in an active or passive way. We find evidence of a spillover effect of unsustainable policies on other regions. The German federal government offsets the effect on the price level by running passive policies. The Bundesbank's prime objective of price stability is therefore endorsed by fiscal policy. The results have implications for the regulation of fiscal policies in the EMU.     

Spending Reversals and Fiscal Multipliers under an Interest Rate Peg

This paper examines whether fiscal stimuli are more effective when the monetary policy is less responsive to inflation. First, we provide empirical evidence suggesting that, in the period of U.S. passive monetary policy, a positive government spending shock was followed over time by a spending cut. Second, our theoretical analysis reveals that the pegged nominal interest rate is not a sufficient condition to generate a large fiscal multiplier. An increase in government spending could increase the long‐run real interest rate, if it is associated with a government spending reversal and a less responsive monetary policy. Consequently, the response of private consumption can be negative and the government spending multiplier is not necessarily greater than 1.     

高等教育财政管理:我国的实践及改革方向

高等教育已成为知识经济发展的关键要素，同时也成为社会“最重要消费品”。正因如此，其重要性使得高等教育的财政管理日益受到重视。本文在概述高等教育财政管理内容和要素的基础上，对我国的高等教育财政管理进行了一番现实的考察，并据此提出改进的路径选择。     

Fiscal Discipline and Exchange Rate Arrangements: Evidence from the Caribbean

This paper assesses the nature of fiscal discipline under alternative exchange rate regimes. First, it shows that fiscal agencies under a currency union with a fixed exchange rate can have a larger incentive to overspend or "free ride" than those under other exchange rate regimes, owing to the agencies' ability to spread the costs of overspending in inflation tax across both time, given the fixed exchange rate, and space, given the currency union. In contrast, such free-riding behavior does not arise under flexible regimes owing to the immediate inflationary impact of spending. Next, empirically, fiscal stances in countries with fixed pegs and currency union regimes demonstrate greater free-riding behavior than do countries with more flexible regimes in fifteen Caribbean countries from 1983 to 2004.     

Fiscal severity and the choice of budget gap closing strategies

The great recession of 2008 forced US local governments to pursue a series of measures to maintain a balanced budget. The authors investigated local governments’ response to the great recession with a focus on Florida, where a crash in the housing market led to a severe erosion of the property tax base. Following the classic cutback management theory, the authors examine how the severity of fiscal stress affected the choice of budget-balancing strategies by Florida’s local governments. The severity of fiscal stress was found to affect not only the number of budget gap closing strategies but also the pattern of adoption of these strategies consistent with the administrative response model.     

Fiscal Stimulus in Times of High Debt: Reconsidering Multipliers and Twin Deficits

We investigate the impact of fiscal stimuli at different levels of the government debt‐to‐GDP ratio for a sample of 17 European countries from 1970 to 2010. This is implemented in an interacted panel VAR framework in which all coefficient parameters are allowed to change continuously with the debt‐to‐GDP ratio. We find that responses to government spending shocks exhibit strong nonlinear behavior. While the overall cumulative effect of a spending shock on real GDP is positive and significant at moderate debt‐to‐GDP ratios, this effect turns negative as the ratio increases. The total cumulative effect on the trade balance as a share of GDP is negative at first but switches sign at higher levels of debt. Consequently, depending on the degree of public indebtedness, our results accommodate long‐run fiscal multipliers that are greater and smaller than one or even negative as well as twin deficit and twin divergence behavior within one sample and time period. From a policy perspective, these results lend additional support to increased prudence at high public debt ratios because the effectiveness of fiscal stimuli to boost economic activity or resolve external imbalances may not be guaranteed.