Fiscal Rules and Deficit Sharing Mechanisms Within Intergovernmental Fiscal Framework
Last great economic crisis and sudden growth of industrial countries’ debt have reinforced discussions on the needs of more strictgovernment spending constraints. Thus, more attention is devoted to negative effects of public debt accumulation. In most of the countries, fiscal limits set by fiscal rules have been breached. In addition, even though subnational government tier takes minimum share of total government debt in most of the countries, these government levels undergo most of the pressure of fiscal consolidation goals. Issue of deficit sharing within the tiers of intergovernmental fiscal system has been one of the clearly addressed scientific and practical problems for a long time. However, both research and practice have not provided generally accepted and satisfactory models and solutions. This is not surprising because the problem is far from being simple. The authors provide recommendations on fiscal rules design that allow attainment of simultaneous goals of enabling utilization of growth potential of borrowing for local governments and safeguarding the financial sustainability.
Index Terms— economic and financial crisis, fiscal rules, deficit sharing, intergovernmental fiscal system,