How Should Subnational Government Borrowing Be Regulated? Some Cross-Country Empirical Evidence

34 Pages Posted: 12 Jan 2006

See all articles by Raju Singh

Raju Singh

International Monetary Fund (IMF)

Alexander Plekhanov

University of Cambridge - Faculty of Economics and Politics

Date Written: March 2005

Abstract

Countries have adopted various institutional responses to subnational government borrowing. Using a sample of 44 countries 1982-2000, this paper provides a panel data analysis to determine the most effective borrowing constraints for containing local fiscal deficits. The results suggest that no single institutional arrangement is superior under all circumstances. The appropriateness of specific arrangements depends upon other institutional characteristics, particularly the degree of vertical fiscal imbalance, the existence of any bailout precedent, and the quality of fiscal reporting.

Keywords: Fiscal federalism, local government, debt, budget deficit, fiscal discipline

JEL Classification: H74, H77

Suggested Citation

Singh, Raju and Plekhanov, Alexander, How Should Subnational Government Borrowing Be Regulated? Some Cross-Country Empirical Evidence (March 2005). IMF Working Paper No. 05/54, Available at SSRN: https://ssrn.com/abstract=874276

Raju Singh (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

Alexander Plekhanov

University of Cambridge - Faculty of Economics and Politics ( email )

Austin Robinson Building
Sidgwick Avenue
Cambridge, CB3 9DD
United Kingdom

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