Institutions of Intergovernmental Fiscal Relations

Challenges Ahead

image of Institutions of Intergovernmental Fiscal Relations

Intergovernmental fiscal institutions are the overarching framework for relations across government levels. They comprise the constitutional set up of a country; the division of power between government levels; the prevalence of fiscal rules across government levels; intergovernmental budget frameworks; the role of independent bodies such as fiscal councils in shaping fiscal relations; the inter-ministerial organisation of fiscal decision making; and other framework conditions shaping intergovernmental fiscal relations and fiscal policy. This book brings together academics and practitioners dealing with or being involved in shaping the institutions of intergovernmental fiscal relations. It has an interdisciplinary focus and provides insight from various academic or practitioners’ fields: economists, political scientists, budget management specialists and others.



Fiscal adjustment, decentralisation and sub-national autonomy

This paper studies the relationship between fiscal decentralisation and the duration of the fiscal consolidation episodes in 17 OECD countries between 1978 and 2009. It appears that consolidation lasts longer when expenditure decentralisation is higher. The paper also finds that transfers from higher levels of government are reduced during consolidation episodes. This suggests that, given a certain institutional structure within the country, central governments are able to shift the burden of consolidation towards lower tiers of government by reducing intergovernmental transfers. This is particularly the case when sub-national governments have little legal autonomy to raise tax revenues and cannot affect executive decisions taken at the central level.


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