Macroeconomic Management and the Devolution of Fiscal Powers

Several of the transition economies are devolving fiscal authority to subnational governments at a time when it is also important to consolidate fiscal policy. This can be problematic because, without appropriate care, the central government's ability to determine the level and structure of rev...

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Bibliographic Details
Corporate Author: International Monetary Fund
Format: eBook
Language:English
Published: Washington, D.C. International Monetary Fund 2002
Series:IMF Working Papers
Subjects:
Online Access:
Collection: International Monetary Fund - Collection details see MPG.ReNa
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245 0 0 |a Macroeconomic Management and the Devolution of Fiscal Powers 
260 |a Washington, D.C.  |b International Monetary Fund  |c 2002 
300 |a 46 pages 
651 4 |a Finland 
653 |a Revenue administration 
653 |a Fiscal federalism 
653 |a Public finance & taxation 
653 |a Fiscal Policy 
653 |a Fiscal consolidation 
653 |a Fiscal policy 
653 |a National Government Expenditures and Related Policies: General 
653 |a Expenditure 
653 |a Taxation, Subsidies, and Revenue: General 
653 |a Expenditures, Public 
653 |a Macroeconomics 
653 |a Public Finance 
653 |a Revenue 
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520 |a Several of the transition economies are devolving fiscal authority to subnational governments at a time when it is also important to consolidate fiscal policy. This can be problematic because, without appropriate care, the central government's ability to determine the level and structure of revenues, public spending, and borrowing may well diminish as fiscal policy is devolved. This paper focuses on how the center can maintain its ability to conduct fiscal policy while devolving revenue, spending, and borrowing powers to lower levels of government. Empirical evidence shows that countries with good governance have maintained fiscal control despite a high degree of fiscal devolution. And decentralization is associated with better fiscal outcomes for middle-income countries with strong governance. Fiscal management issues are explored in four key areas: budget coordination mechanisms at the macro level tax-effort incentives and revenue-sharing mechanisms expenditure control and hard-budget constraints and criteria and rules for borrowing