Fiscal Rules for Subnational Governments: Lessons from the EMU

We study the tax-spend nexus for Russian regional budgets. Causal relationship running from taxing to spending is found, thus supporting the concept “tax and spend” suggested by M. Friedman. Next, elasticity of expenditure by revenue is estimated for a panel of 80 regional budgets basing on data for 2000—2017. Estimates are in the range of 0.72 to 0.78 (depending on the econometric technique), which exceeds elasticity for the federal budget more than twice. This evidences that fiscal policy at the sub-federal (as distinct from the federal) level has clear pro-cyclical nature. Besides, the largest sensitivity of expenditure to revenue shocks is found for the item “national economy”, implying marked adverse implications for economic growth. We suggest to mitigate this effect by modifying fiscal rules for sub-federal budgets. They are currently aimed primarily at enhancing fiscal discipline, with less emphasis on countercyclical policy, insulating economy from fiscal shocks.

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Fiscal rules: Excessive limitation or indispensable instrument of fiscal sustainability?

Voprosy Ekonomiki ◽

10.32609/0042-8736-2016-4-5-29 ◽

2016 ◽

pp. 5-29 ◽

Cited By ~ 2

Author(s):

E. Gurvich ◽

I. Sokolov

Keyword(s):

Historical Data ◽

Federal Budget ◽

Fiscal Sustainability ◽

Fiscal Rules ◽

External Shocks ◽

Base Price ◽

Depth Analysis ◽

Fiscal Balance ◽

Lower Size ◽

Budget Expenditure

In-depth analysis of international and Russia’s experiences with implementing fiscal rules is presented. Theoretical and empirical evidences are suggested in favor of retaining the present fiscal rules with some modifications aimed at ensuring: a) a relatively stable level of federal budget expenditure with guaranteed full execution of all commitments; b) countercyclical fiscal policy, based on flexibleand proper reaction to revenue changes; and c) robustness of fiscal rules to internal and external shocks. The main new features suggested include modified calculation of the oil base price, different measurement of cyclical fiscal revenues, lower size of structural fiscal balance, and thorough specification of sources for each item of the balance. The modified rules envisage increased flexibility by relaxing to a pre-set extent and for a pre-set time spending limits in response to extreme shocks. The suggested version of fiscal rules has been tested by application to historical data for 2005-2015, and macro projections for 2015-2025.

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Kajian Desain Penataan Daerah Bidang Manajemen Pemerintahan Di Provinsi Papua Barat

JURNAL ILMU PEMERINTAHAN Kajian Ilmu Pemerintahan dan Politik Daerah ◽

10.24905/jip.v1i1.434 ◽

2016 ◽

Vol 1 (1) ◽

pp. 49 ◽

Cited By ~ 1

Author(s):

Fernandes Simangunsong

Keyword(s):

Regional Autonomy ◽

Early Stages ◽

Good Management ◽

New Challenges ◽

Papua Barat ◽

Continuous Work ◽

Subnational Governments

The implementation of regional autonomy within the framework of decentralization is a complex and continuous work . In the early stages of decentralization , there is a transfer of various types of authority from the center to the various institutions , especially institutions subnational governments . After the transfer of authority will then be followed by the transfer of financing , documents and facilities . After the completion stages passed , does not mean the work has been completed . It appears a series of new challenges related to the ability of isntitusi who obtained the transfer of authority to manage it properly . Without good management , decentralization is precisely that for democracy , effectiveness , efficiency and fairness can not be achieved . It would appear the sources of inefficiency , ineffectiveness and new injustices in areas that can be a trigger for a second series of multidimensional crisis

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