Fiscal rules for subnational goverments


This paper investigates the logic and the workings of fiscal rules, with focus on rules for subnational governments. It argues against a simplistic view that sees the writing of numerical limits on fiscal variables as the solution to fundamental fiscal problems. It suggests that international organizations should take a more comprehensive approach when dealing with the fiscal problems of developing countries. Such an approach requires a deep understanding of the determinants of undesirable fiscal outcomes in each particular case, which in turn requires some explicit political analysis.

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