On the Determinants of Fiscal Non-Compliance: An Empirical Analysis of Spain’s Regions

By Mar Delgado-Téllez, Victor Duarte Lledo, Javier J. Pérez

January 19, 2017

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Mar Delgado-Téllez, Victor Duarte Lledo, and Javier J. Pérez On the Determinants of Fiscal Non-Compliance: An Empirical Analysis of Spain’s Regions, (USA: International Monetary Fund, 2017) accessed November 21, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

This paper proposes an empirical framework that distinguishes voluntary from involuntary compliance with fiscal deficit targets on the basis of economic, institutional, and political factors. The framework is applied to Spain’s Autonomous Communities (regions) over the period 2002-2015. Fiscal noncompliance among Spain’s regions has shown to be persistent. It increases with the size of growth forecast errors and the extent to which fiscal targets are tightened, factors not fully under the control of regional governments. Non-compliance also tends to increase during election years, when vertical fiscal imbalances accentuate, and market financing costs subside. Strong fiscal rules have not shown any significant impact in containing fiscal non-compliance. Reducing fiscal non-compliance in multilevel governance systems such as the one in Spain requires a comprehensive assessment of intergovernmental fiscal arrangements that looks beyond rules-based frameworks by ensuring enforcement procedures are politically credible.

Subject: Budget planning and preparation, Fiscal consolidation, Fiscal policy, Fiscal risks, Fiscal rules, Government debt management, Public financial management (PFM)

Keywords: Budget planning and preparation, CG authorization, Credit ratings, Deficit target, Europe, Fiscal compliance, Fiscal consolidation, Fiscal federalism, Fiscal risks, Fiscal rules, Global, Government coalition, Government debt management, Government incumbent, Multi-level government context, Pro-autonomy party, Public finance, Rules, Soft budget constraints, WP

Publication Details

Pages:

33
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2017/005
Stock No:

WPIEA2017005
ISBN:

9781475569841
ISSN:

1018-5941

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