Fiscal Rules for Subnational Governments. Some Organizing Principles and Latin American Experiences

In this paper we investigate the logic and the workings of fiscal rules, with focus on rules for subnational governments. We argue against a simplistic view that sees the writing of numerical limits on fiscal variables as the solution to fundamental fiscal problems. We suggest that international organizations should take a more comprehensive approach when dealing with the fiscal problems of developing countries. Such an approach requires a deep understanding of the determinants of undesirable fiscal outcomes in each particular case, which in turn requires some explicit political analysis.