Stabilizing IntergovernmentalTransfers in Latin America : A Complement toNational/Subnational Fiscal Rules?

Gonzalez, Christian Y. ; Rosenblatt, David ; Webb, Steven B.

World Bank, Washington, DC

关键词: MACROECONOMIC STABILIZATION;    INTERGOVERNMENTAL TRANSFERS;    SUBNATIONAL GOVERNMENT;    GOVERNMENT SPENDING POLICY;    GROSS DOMESTIC PRODUCT;   

DOI  :  10.1596/1813-9450-2869
RP-ID  :  WPS2869

学科分类：社会科学、人文和艺术（综合）

来源: World Bank Open Knowledge Repository

【 摘 要 】

The traditional theory of fiscalfederalism assigns the role of macroeconomic stabilizationto the federal government. In addition to this long-standingtheoretical result, there is empirical observation thatfederal governments in developing countries typically havecheaper and more stable access to capital markets, relativeto subnational governments. Drawing on the recent experienceof four large federal countries in Latin America-Argentina,Brazil, Colombia, and Mexico--the authors examine howintergovernmental transfers affect the division of theburden of stabilization across the levels of government,when the nation as a whole faces economic fluctuations.Imposing stabilizing rules on federal transfers that protectsubnational governments from fluctuations in the businesscycle can serve two purposes. During boom periods,stabilizing rules prevent subnational governments'tendency to increase inflexible expenditures. And duringdownturns, stabilizing rules place the burden of borrowingat the federal level-the level most appropriate formacroeconomic stabilization and often the level withsuperior access to credit. Despite the logic of these rules,recent experience of the four countries reveals that theserules can be risky, particularly in the face of high GDPvolatility. Protection against falling revenues in thedownturn constitutes a contingent liability for the centralgovernment. Argentina's stabilizing rule contributed tofiscal and political tensions during its ongoing crisis.Colombia is beginning to implement similar rules. Meanwhile,Brazilian and Mexican transfers do not implement such rulesand fiscal and economic results do not appear to have faredany worse for this absence. The authors draw on the countryexperience to establish that certain conditions should be inplace before establishing a stabilization rule tofederal-to-subnational fiscal transfers-in particular theelimination of long-term structural fiscal imbalances,either within levels of government or across levels of government.