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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.

 

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Intergovernmental fiscal relations and fiscal coordination during the crisis

This chapter documents some key facts on the timing, synchronicity, cyclicality, contribution and composition of central and sub-national governments’ fiscal responses following the global financial crisis among advanced economies. We find evidence that post-crisis fiscal responses across government levels have become more synchronised, suggesting coordinated efforts across government levels to implement fiscal expansions. We then develop and test some hypotheses on the role that fiscal autonomy, transfer dependency and sub-national fiscal rules may have played to foster fiscal coordination in the post-crisis era. Preliminary econometric results show that fiscal coordination improves with the degree of spending autonomy. There is no evidence, however, that additional revenue autonomy, transfer dependency or a smartening of sub-national fiscal rules contributed to improvements in fiscal coordination in the post-crisis years.

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