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The purpose of this article is to challenge the balanced budget practices of U.S. state governments and offer alternatives that may lead to better fiscal, economic and policy outcomes. We contend that the norm of balance may be leading U.S. states to make fiscal decisions that result in less-than-ideal outcomes, especially during economic downturns.

This is a normative article. We examine the scholarly evidence regarding balanced budget practices to assess the appropriateness of balanced budget norms. We also examine the fiscal rules followed by Eurozone countries to draw potential lessons for U.S. states.

We conclude that state governments should move away from strict norms of budget balance and seek more flexible approaches. We suggest that instead of following strict rules and norms of balance, U.S. states should consider implementing escape clauses, debt and deficit ceilings, and fiscal councils. We also suggest that the Federal Reserve be open to lending directly to states during fiscal crises to ensure that states have access to affordable credit.

The balanced budget norm has become ingrained in U.S. state budgeting practices, so much so that public officials and scholars alike rarely question it. The novel contribution of our article is to question this practice in a systematic way and propose alternative approaches.

With the global financial crisis, the United Arab Emirates (UAE) experienced its own unraveling of macro-financial imbalances and thus presents an interesting case to analyze the underlying fragilities in federal governments. The purpose of this paper is to investigate the evolution of fiscal policy in the UAE at consolidated and subnational levels in the run-up and after the crisis, and provide pertinent insights about the importance of policy coordination in other federal fiscal systems – and monetary unions, as brought to light by the recent developments in Europe.

In measuring the cyclicality of fiscal balances at the consolidated and emirate level in the UAE, this paper uses the non-hydrocarbon primary budget balance, excluding interest spending and hydrocarbon revenues, investment income of the sovereign wealth fund, scaled by non-hydrocarbon GDP. The cyclically adjusted primary balance is estimated by deducting cyclical components from the actual balance. It is important to correct for cyclical changes because the budget balance tends to vary endogenously according the state of the economy – deteriorating during a bust and improving in a boom. Furthermore, since hydrocarbon revenues are dependent on the erratic behavior of hydrocarbon prices, the cyclically adjusted non-hydrocarbon primary balance is computed, using the elasticity of non-hydrocarbon revenues and primary expenditures relative to non-hydrocarbon GDP, to assess whether fiscal policy exacerbates economic fluctuations in the UAE at the aggregate and emirate levels.

The empirical findings show that procyclical fiscal policies prior to the crisis reinforced the financial sector cycle, exacerbated the economic upswing, and thereby contributed to the build-up of macro-financial vulnerabilities. The paper also sets out policy lessons to develop a rule-based fiscal framework that would help strengthen fiscal policy coordination between the various layers of government and ensure long-term fiscal sustainability and a more equitable intergenerational distribution of wealth.

The lack of fiscal policy coordination among subnational governments complicates macro-economic management at the federal level. Since the UAE has a pegged exchange rate regime and consequently a limited scope to use monetary policy, the burden of macro-economic stabilization falls on fiscal policy. Accordingly, this paper shows that procyclical fiscal policies prior to the crisis reinforced the “financial accelerator” effect, exacerbated the economic cycle, and thereby contributed to the build-up of economic and financial vulnerabilities in the UAE.

In view of the significance of public–private partnerships (PPPs) as a tool for bridging infrastructure deficits, it becomes imperative to study its determinants. The objective of this paper is to empirically study the determinants of PPPs in India at a subnational level, in terms of both number and value of PPP projects.

This study investigates the determinants of value and number of Indian PPPs at a subnational level for the period 2008–2017. The determinants are analyzed using two-step system generalized method of moments (GMM) and negative binomial regression. Select correlates examined are market size, fiscal compulsions, institutional quality, financial sector development and physical infrastructure.

The results indicate that fiscal compulsions, financial sector development and physical infrastructure influence PPPs favorably, whereas low institutional quality impacts PPPs adversely. A pertinent finding of this study is that the past value of PPPs lowers the current year's PPP value.

The findings are expected to assist subnational governments and policymakers in formulating policies that attract more PPP projects (in terms of both value and number).

This is the first study that analyzes the determinants of infrastructure PPPs at a subnational level in India.

Even though fiscal autonomy plays a role as one of the prerequisite conditions for fiscal decentralization, there has been little research into why fiscal autonomy is important or how it works for subnational governments. This study aims to examine the effectiveness of fiscal autonomy by using a panel dataset of US state governments from 2001 to 2013.

According to the results of general method of moments, the author find that fiscal autonomy leads to reducing volatility in total expenditures.

It indicates that fiscal autonomy is necessary for state governments performing one of the three Musgravian role of government (e.g. stabilization). However, when we look at the more detailed relationship between fiscal autonomy and volatility by applying expenditures from major categories such as capital outlay, general expenditure and public welfare, this study finds no statistically significant results. Interestingly, balanced budget requirement and tax and expenditure limitation indicate different effects on expenditure volatility, even though they belong to the same institutional factors.

This paper is meaningful because it can support the importance of fiscal autonomy on fiscal performance.

Although the Chinese economy has experienced a strong and rapid growth due to the success of its economic reform, the Chinese central government faces a stern fiscal decline. The fiscal problem has undermined the ability of the central government in completing many crucial governing tasks. By examining the institutional root of the fiscal problem, this paper argues that the fiscal decline is part of the ironic corollary of the decentralization strategy of China’s economic reform which produces a “weak center, strong local” outcome. To fully address the problem, China should undertake major institutional reforms to redefine as well as institutionalize the fiscal roles of different levels of government.

In this exploratory multiple case study, we aim to compare the internationalization of two state-owned enterprises (SOEs) owned by subnational governments with three owned by central governments in Latin America. This study provides a contextualized answer to the question: What are the differences in the internationalization of subnationally owned SOEs compared to central SOEs? This study finds that the speed and diversification of these two types of SOEs’ internationalization differ because they have a different expansion logic. Subnationally owned SOEs have a gradual and diversified expansion following market rules. Central government’s SOEs are specialized and take more drastic steps in their internationalization, which relates to non-market factors.

This study builds an exploratory qualitative comparative case analysis that uses multiple sources of data and information to develop a comprehensive understanding of SOEs through process tracing.

The study posits some assumptions that are confirmed in the case analysis. This study finds relevant differences between sub-national (SSOEs) and central authority (CSOEs’) strategies. SSOEs’ fewer resources and needs to increase income push them to follow a gradual market-driven internationalization and to diversify abroad. CSOEs non-gradual growth is justified by non-market factors (i.e. national politics). CSOEs do not diversify abroad due to the broader set of constituencies they have to face.

Given the exploratory comparative case study of this research, the findings are bounded by the particularities of the cases and their region (Latin America). This paper and its findings can be useful for theory building but it does not claim any generalization capacity.

This study adds complexity into the SOEs phenomenon by distinguishing between different types of SOEs. This paper contributes to the study of subnational phenomena and its effect in SOEs’ internationalization process, which is an understudied topic. To the authors’ best knowledge, this is among the first studies that explore subnational SOEs in Latin America.

The purpose of this study is to analyze the scope and magnitude of Chinese budgetary responses to the coronavirus disease 2019 (COVID-19) pandemic.

This study analyzes budgetary response in China by means of public reports, news reports and policy documents.

The Chinese responses were comprehensive, flexible and fast. Through the normal authorization process, simplifying procedures of budget allocation and special legislative approval after the surge of COVID-19 cases, China used many budgetary measures to help suffering businesses and households to buffer the economic difficulties caused by the pandemic. It also increased public health spending very quickly so subnational governments could control and prevent the pandemic with the necessary resources. International relief efforts have also been increased. These findings show the unique strength of the Chinese political system, which is very flexible and quick in resource mobilization.

This study offers a quick review of the Chinese budgetary responses to the COVID-19 pandemic. It also highlights some of the future concerns and needs of the Chinese government in domestic and global health areas.

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.

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.

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.

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.