Premium
Municipality Budget Rules and Debt: Is the Italian Regulation Effective?
Author(s) -
Monacelli Daniela,
Pazienza Maria Grazia,
Rapallini Chiara
Publication year - 2016
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/pbaf.12094
Subject(s) - stability and growth pact , debt , pact , control (management) , international economics , economics , fiscal policy , economic policy , business , local government , monetary economics , macroeconomics , public economics , finance , member states , european union , political science , management , public administration , law
This article studies the local fiscal rules in force in Italy—the Domestic Stability Pact and debt constraints—that have been adopted to coordinate levels of government and be compliant with the European Stability and Growth Pact. The aim is to assess the effects of such rules on local borrowing and investments, the latter being crucial for growth. To this end, a dataset of Italian municipality budgets from 1999 to 2009 is exploited. The analysis shows that fiscal rules help to control local debt, but they have also led to a sharp decrease in investments, especially among compliant municipalities