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Article
Publication date: 1 March 2011

Craig S. Maher and Steven C. Deller

The intent of this research is determine the extent to which selfreported measures of fiscal condition are consistent with commonly identified measures of fiscal condition…

Abstract

The intent of this research is determine the extent to which selfreported measures of fiscal condition are consistent with commonly identified measures of fiscal condition using secondary financial data. While the field of government finance has amassed a lengthy list of research on fiscal condition and fiscal stress assessment, there remains a gap in the research on the extent to which practitioners' perceptions of fiscal stress are consistent with such measures. Our results suggest that there is limited evidence of a relationship between self-reported and objective measures of fiscal condition

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Journal of Public Budgeting, Accounting & Financial Management, vol. 23 no. 3
Type: Research Article
ISSN: 1096-3367

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Article
Publication date: 1 March 2013

John F. Sacco and Gerard R. Busheé

This paper analyzes the impact of economic downturns on the revenue and expense sides of city financing for the period 2003 to 2009 using a convenience sample of the…

Abstract

This paper analyzes the impact of economic downturns on the revenue and expense sides of city financing for the period 2003 to 2009 using a convenience sample of the audited end of year financial reports for thirty midsized US cities. The analysis focuses on whether and how quickly and how extensively revenue and spending directions from past years are altered by recessions. A seven year series of Comprehensive Annual Financial Report (CAFR) data serves to explore whether citiesʼ revenues and spending, especially the traditional property tax and core functions such as public safety and infrastructure withstood the brief 2001 and the persistent 2007 recessions? The findings point to consumption (spending) over stability (revenue minus expense) for the recession of 2007, particularly in 2008 and 2009.

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Journal of Public Budgeting, Accounting & Financial Management, vol. 25 no. 3
Type: Research Article
ISSN: 1096-3367

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Article
Publication date: 12 April 2019

Emilio Gallego Neira and Carlos Martínez de Ibarreta

This paper aims to analyze the effectiveness of macroprudential and fiscal policies taken from a sample of ten advanced economies in relation to the mitigation of…

Abstract

Purpose

This paper aims to analyze the effectiveness of macroprudential and fiscal policies taken from a sample of ten advanced economies in relation to the mitigation of real-estate and credit bubbles by comparing their performance.

Design/methodology/approach

This comparison is elaborated with a seemingly unrelated regression methodology, which allows the assessment of individual countries’ performance and improves the estimation of the dependent variables versus an individual regression.

Findings

The analysis concludes that countercyclical measures have been more effective to control the growth of household debt. Furthermore, this study validates that macroprudential measures focused on the residential sector meet their objective of controlling the growth of house prices, whereas those macroprudential measures with more generic targets are effective to control the growth of household debt.

Originality/value

As opposed to previous panel-regression studies, which have analyzed the performance of macroprudential and fiscal measures in generic terms, this paper compares the performance of these tools in ten advanced economies. Based on the analysis performed, several recommendations are derived for policymakers.

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Journal of Financial Regulation and Compliance, vol. 27 no. 4
Type: Research Article
ISSN: 1358-1988

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Article
Publication date: 22 August 2020

Craig S. Maher, Jae Won Oh and Wei-Jie Liao

Identifying tools for predicting fiscally distressed local governments has received heightened attention following the Great Recession of 2007–2009. Despite the recent…

Abstract

Purpose

Identifying tools for predicting fiscally distressed local governments has received heightened attention following the Great Recession of 2007–2009. Despite the recent expansion of research, measuring fiscal distress is challenging because of the operational complexity associated with the term. Furthermore, many local governments are too small to produce a Comprehensive Annual Financial Report (CAFR), upon which many empirical studies of fiscal condition or fiscal distress are based. This study designs a parsimonious tool for identifying fiscally distressed entities based on existing literature. The authors examine Nebraska's 93 counties over a nine-year period (from 2010 to 2018). In order to ensure the validity of our tool, we replicate two well-known empirical approaches of assessing local fiscal condition and compare the results with ours. The authors find nearly all counties in Nebraska to be free from fiscal distress in the past decade. However, since most counties in Nebraska have small populations and are far from urban centers, they may still be vulnerable to future fiscal shocks and may need to closely monitor their fiscal condition.

Design/methodology/approach

The authors offer a parsimonious method for assessing the existence of fiscally distressed counties. They select predictors of fiscal distress based on two criteria. First, for the purpose of this study, the authors use financial information that is uniform, easily accessible and does not rely on CAFRs. In order to make their model parsimonious and replicable, the authors only consider factors that have the most decisive effects on local fiscal conditions. Second, the authors draw on indicators that have been consistently supported by previous studies (e.g., Kloha et al., 2005; Gorina et al., 2018). The authors test the validity of this approach using correlation analysis and regression modeling, similar to Wang et al. (2007).

Findings

The authors’ fiscal distress measure shows encouraging signs. Results show that all but Brown's model are highly correlated. The decile and standard deviation models have the strongest correlation (r = 0.955, p < 0.01). These two models are also significantly associated with Kloha et al.'s model. Their correlation coefficients are 0.812 and 0.830, respectively. Consistent with Wang et al. (2007), the authors find modest associations between our fiscal measures and socioeconomic measures.

Research limitations/implications

Limitations include questions of generalizability – we are only studying Nebraska counties. The extent to which the findings are generalizable to counties in other states remains to be seen. We advise readers and policymakers to bear in mind that at this point, there is no perfect way to measure local fiscal condition or fiscal distress. Specifically, with our model, the foremost advantages of parsimony are data accessibility and replicability. However, unlike other existing tools that consider dozens of indicators, our tool bears the cost of not employing a more comprehensive perspective that may be required to capture a full picture of local fiscal condition.

Practical implications

The purpose of this research was to construct and present a parsimonious way of identifying local fiscal distress that is easily replicated and applied in practice. The challenges were operational – both in terms of definition and measurement. Fiscal distress is a nebulous concept that can vary based on the researcher's intent. Our chosen set of indicators have two characteristics: accessibility of financial information and consistency with past studies. Thus, we assess two of the four dimensions of solvency: budgetary solvency and long-run solvency. The authors suggest that this effort should not be used as a tool by state lawmakers to accuse and judge local governments. Instead, it should be used to assist local governments as Iowa and Colorado do. The findings could be the beginning of a conversation between the state and local governments to determine the best course(s) of action. As previously mentioned, there are many causes of fiscal distress and poor decision-making is not very common. Looking into the future, the authors expect more local governments to become fiscally distressed and the primary cause would be economic/demographic change. Since many local governments in Nebraska have very small populations and are far from the urban centers of Omaha and Lincoln, they might be vulnerable to future fiscal shocks. Thus, state lawmakers need to begin considering strategies to deal with local fiscal distress. The authors do have limitations in measurement. However, if used appropriately, this research can add value to the discussion of managing local government fiscal distress in Nebraska and other similar states.

Social implications

While the analysis finds little fiscal distress currently in Nebraska, there is concern that with population migration to the urban areas and the “graying” of the state, local governments in rural areas (the vast majority in Nebraska) could face more serious issues in future years. A recent study showed that local fiscal condition is negatively associated with the distance from the municipality to the urban centers of Omaha and Lincoln (Maher et al., 2019). These spatial effects could be further exacerbated in a state that ranks near the bottom in financial support of local governments and policy makers are committed to “controlling” property taxes.

Originality/value

This study, while building on prior work, is unique in that it focuses on counties as opposed to municipalities, which are the most common units of analysis. The authors also offer a model for assessing fiscal distress in a state that currently does not have state-level systems to monitor local finances. Finally, rather than relying on audited annual financial reports which would disqualify many smaller local governments, the authors offer a parsimonious tool that is easily replicated and can be used by all local governments that submit uniform financial reports to their states.

Details

Journal of Public Budgeting, Accounting & Financial Management, vol. 32 no. 4
Type: Research Article
ISSN: 1096-3367

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Article
Publication date: 1 February 1988

Anthony Clunies Ross

The assignment of targets to instruments in developing countries cannot satisfactorily follow any simple universal rule. Which approach is appropriate is influenced by…

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Abstract

The assignment of targets to instruments in developing countries cannot satisfactorily follow any simple universal rule. Which approach is appropriate is influenced by whether the economy is dominated by primary exports, by the importance of the domestic bond market and bank credit, by the extent of existing restriction in foreign exchange and financial markets, by the presence or absence of persistent high inflation, and by the existence or non‐existence of an active international market in the country's currency. Eighteen observations and maxims on stabilisation policy are tentatively drawn (pp. 64–8) from the material reviewed, and the maxims are partly summarised (pp. 69–71) in a schematic assignment, with variations, of targets to instruments.

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Journal of Economic Studies, vol. 15 no. 2
Type: Research Article
ISSN: 0144-3585

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Article
Publication date: 2 November 2020

Justina Jose, Priyanka Mishra and Rahul Pathak

This article examines the preliminary impact of the Sars-CoV-2 pandemic on India's economic and budgetary landscape – the most affected developing country from the first…

Abstract

Purpose

This article examines the preliminary impact of the Sars-CoV-2 pandemic on India's economic and budgetary landscape – the most affected developing country from the first wave of the pandemic. It also includes a discussion of the monetary and fiscal responses adopted and the challenges faced in formulating the response to the pandemic.

Design/methodology/approach

Using high-frequency economic and fiscal indicators, this article evaluates the economic impact of the pandemic on the Indian economy. Further, it uses data from government sources and news to highlight the measures adopted at the national and subnational level in response to the pandemic.

Findings

The difficult economic conditions prior to the pandemic limited the fiscal space available to the government. As a result, the national and subnational governments have been cautious of accumulating excessive debt and have primarily responded with liquidity-enhancing measures, in addition to some fiscal measures for the most vulnerable. Overdependence on consumption taxes has led to unprecedented revenue shortfalls prompting the exploration of new avenues for revenue generation and implementation of austerity measures – some of which may be counterproductive in the long run.

Originality/value

The paper highlights the policy response of the largest democracy that has been hit hard by the pandemic. It also highlights various institutional and resource constraints that influenced the policies adopted. India's experience in responding to the virus could provide lessons for other developing countries.

Details

Journal of Public Budgeting, Accounting & Financial Management, vol. 33 no. 1
Type: Research Article
ISSN: 1096-3367

Keywords

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Article
Publication date: 28 August 2020

Ringa Raudla and James W. Douglas

Since regaining its independence, the Estonian government has followed policies of fiscal consolidation when responding to economic crises. Its response to the…

Abstract

Purpose

Since regaining its independence, the Estonian government has followed policies of fiscal consolidation when responding to economic crises. Its response to the COVID-19-crisis has been quite different – it has authorized additional expenditures, cut taxes and incurred considerable debt. This paper gives an overview of the budgetary measures adopted and explores the question: why was it different this time?

Design/methodology/approach

The authors draw upon policy documents to zoom in on the main political, institutional and economic factors that help to explain Estonia's departure from extreme fiscal conservatism in the midst of the global pandemic.

Findings

The authors found the key political factors to be the party composition of the government, policy diffusion and policy learning. Key economic factors included Estonia's very low level of debt prior to the crisis and credit market advantages gained from Eurozone membership.

Originality/value

Estonia presents an interesting case because in all previous crises it responded with fiscal consolidation, whereas it is now responding with extensive fiscal stimulus.

Details

Journal of Public Budgeting, Accounting & Financial Management, vol. 32 no. 5
Type: Research Article
ISSN: 1096-3367

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Article
Publication date: 30 May 2019

Abel Mawuko Agoba, Joshua Yindenaba Abor, Kofi Osei, Jarjisu Sa-Aadu, Benjamin Amoah and Gloria Clarissa Odortor Dzeha

The purpose of this paper is to primarily investigate the ability of independent central banks (central bank independence (CBI)) to improve fiscal performances in Africa…

Abstract

Purpose

The purpose of this paper is to primarily investigate the ability of independent central banks (central bank independence (CBI)) to improve fiscal performances in Africa, accounting for election years, and also to examine whether the effectiveness of CBI in improving fiscal performance is enhanced by higher political institutional quality.

Design/methodology/approach

Using recent CBI data from Garriga (2016) on 48 African countries, 90 other developing countries and 40 developed countries over the period 1970–2012, the authors apply a two stage system GMM with Windmeijer (2005) small sample robust correction estimator to examine the impact of CBI and elections on fiscal policy in Africa, other developing countries and developed countries.

Findings

The authors provide evidence that unlike in other developing countries and developed countries, CBI does not significantly improve fiscal performance in Africa. However, the effectiveness of CBI in improving fiscal performance in Africa is enhanced by higher levels of institutional quality. Although elections directly worsen fiscal performance in Africa, institutional quality enhances CBI’s effect on improving fiscal performance in election years across Africa, other developing countries and developed countries.

Practical implications

The findings of the study are significant as they provide insight into the benefits of having strong institutions to complement independent central banks in order to control fiscal indiscipline in election years.

Originality/value

The study is the first among the studies of CBI-fiscal policy nexus, to measure fiscal policy using net central bank claims on government as a percentage of GDP. In addition to the use of fiscal balance, this study also uses cyclically adjusted fiscal balance as a measure of fiscal policy. This is a critical channel through which independent central banks can constrain government spending. It also compares findings in Africa to other developing countries, noting some differences.

Details

International Journal of Emerging Markets, vol. 14 no. 5
Type: Research Article
ISSN: 1746-8809

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Article
Publication date: 11 November 2019

Elina De Simone, Mariangela Bonasia, Giuseppe Lucio Gaeta and Lorenzo Cicatiello

Making citizens able to monitor and evaluate public spending activities is a fundamental issue in public financial management literature. The purpose of this paper is to…

Abstract

Purpose

Making citizens able to monitor and evaluate public spending activities is a fundamental issue in public financial management literature. The purpose of this paper is to analyze whether fiscal transparency, measured by the Open Budget Index, has an effect on public spending performance, measured by the World Economic Forum’s Global Competitiveness Report data.

Design/methodology/approach

Research methods rely on random-effects panel regression models on a country-level panel data set of 82 world countries observed in the 2008–2015 time interval.

Findings

Results show that the potential positive effects of fiscal transparency are mediated by the level of democracy of the country. In detail, in democratic countries, a higher degree of disclosure of fiscal information is correlated with a higher efficiency of government spending while, in non-democratic countries, fiscal transparency does not seem to provide any effect.

Social implications

The results suggest that fiscal transparency can be a powerful device where politicians can be held accountable for their actions, while it could fail to provide positive results where a strong and effective vertical accountability is missing.

Originality/value

The novelty of the paper is twofold. First, it provides new additional evidence about the positive effect that fiscal transparency has on public spending efficiency by advancing previous research on this topic (Porumbescu, 2017; Montes et al., 2019). Second, the paper investigates conceptually and empirically how the positive effect on public spending efficiency determined by fiscal transparency depends on the degree of democracy present in the institutional environment in which fiscal information disclosure is implemented.

Details

Journal of Economic Studies, vol. 46 no. 7
Type: Research Article
ISSN: 0144-3585

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Article
Publication date: 1 March 2004

Hannarong Shamsub and Joseph B. Akoto

In the past two decades, much of the literature in the area of government financial management has been devoted to studying the causes of fiscal stress. Most studies…

Abstract

In the past two decades, much of the literature in the area of government financial management has been devoted to studying the causes of fiscal stress. Most studies emphasized the role of such factors as economic cycles, business relocation and factors beyond the control of policy makers as major causes of fiscal stress. This study extends the scope of the research in this area to investigate whether state and local fiscal structures contribute to fiscal stress. Using a pooled cross-sectional time-series approach with the state-local data ranging from 1982 to 1997, the result shows that: there is more significant difference in the composition of tax structures than that of total revenue; high aggregate spending is associated with high fiscal stress; state and local governments over-commit on the social welfare category; local revenue diversification is associated with low fiscal stress; and fiscal decentralization or high spending responsibility assumed by local governments is associated with low fiscal stress. The findings suggest that local revenue diversification and fiscal decentralization can be used as measures to reduce fiscal stress.

Details

Journal of Public Budgeting, Accounting & Financial Management, vol. 16 no. 1
Type: Research Article
ISSN: 1096-3367

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