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Fiscal Slack and Counter‐Cyclical Expenditure Stabilization: A First Look at the Local Level
Author(s) -
Marlowe Justin
Publication year - 2005
Publication title -
public budgeting and finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.694
H-Index - 30
eISSN - 1540-5850
pISSN - 0275-1100
DOI - 10.1111/j.1540-5850.2005.00367.x
Subject(s) - economics , balance (ability) , sample (material) , state (computer science) , fund accounting , fiscal policy , monetary economics , public economics , accounting , algorithm , computer science , medicine , chemistry , financial accounting , accounting information system , chromatography , physical medicine and rehabilitation
There is a rich literature on how state governments use slack fiscal resources—most often in the form of rainy day funds and budget stabilization funds—to minimize the effect of economic downturns. This paper presents the first known examination of whether slack resources have the same counter‐cyclical effects at the local level. It uses a panel data set to determine whether one particular form of local fiscal slack, general fund balance, stabilizes current annual expenditures among a sample of 103 Minnesota cities from 1990 to 2000. The findings suggest different fund balance portions have marginal but nonetheless important effects on expenditures.