The literature on fiscal federalism has amply discussed both the potential efficiency and welfare gains from decentralization and the potential trade-offs between decentralization and income redistribution. By contrast, it has generally put less emphasis on the effects of decentralization on...

This paper analyzes the impact of decentralization on overall fiscal performance in the European Union, taking into account fiscal institutional arrangements. We find that spending decentralization has been associated with sizably better fiscal performance, especially when transfer dependency of...

The COVID-19 lockdowns have brought about the need of large fiscal responses in all European countries. However, countries across Europe are differently equipped to respond to the shock due to differences in economic conditions and fiscal space. We build on the model by Berger and others (2019)...

This paper examines the impact of macroeconomic and financial sector policy announcements in the United States, the United Kingdom, the euro area, and Japan during the recent crisis on interbank credit and liquidity risk premia. Announcements of interest rate cuts, liquidity support, liability...

Using the IMF''s Global Economic Model, calibrated to the European Union, the effects of reform in product and labor markets are quantified for both a large and a small euro area economy. When markups in these markets are reduced, there are sizable long-term gains in output and employment. Most...

Within the context of reigniting post crisis macroeconomic growth, income inequality has emerged as a topic of significant interest for both academics and policymakers (Bastagli, Coady, and Gupta, 2012) This study builds on past literature on fiscal decentralization suggesting that...

Delegating fiscal decision making power to sub-national governments has been an area of interest for both academics and policymakers given the expectation that it may lead to better and more efficient provision of public goods and services. Decentralization has, however, often occurred on the...

Several transition economies have undertaken fiscal decentralization reforms over the past two decades along with liberalization, privatization, and stabilization reforms. Theory predicts that decentralization may aggravate fiscal imbalances, unless the right incentives are in place to promote...

This paper describes the institutional changes that have induced a decline in the vertical fiscal imbalance (VFI) - defined as the share of sub-national own spending not financed through own revenues - in four European countries: Belgium, Italy, Norway, and Spain. The decline in VFI was achieved...

In many countries the decentralization of spending responsibilities has outpaced the decentralization of revenue powers. Sub-national governments have then to rely on transfers from the center and borrowing to finance their spending. When this occurs, we find that the overall fiscal deficit...