Resist, Recover, Renew : Fiscal Resilience as a Strategic Response to Economic Recessions

The cyclicality of economic recessions worsens fiscal stability and increases vulnerability to future shocks. This paper argues that there is need to center the concept of resilience (Boin & Van Eeten, 2013; Duit, 2016) as a frame for public financial management. The study introduces a theoretical framework of fiscal resilience and empirically examines the extent to which local governments demonstrate fiscal resilience to economic recessions. Fiscal resilience is decomposed into pre-crisis fiscal resistance, post-crisis fiscal recovery and long-term fiscal renewal. The empirical strategy employs a Cox proportional hazard model, and over three decades of data (1991 – 2018) that covers two previous recessions - Dotcom and the Great Recession – to identify the determinants fiscal resilience. The findings indicate that although strategic decisions associated with revenue diversification and countercyclical capacity facilitate fiscal resilience, specific features of local government finances such as the revenue structure and service structure are critical to fiscal recovery and renewal. In addition, the underlying characteristics of each recession affect whether institutional and economic conditions facilitate fiscal resilience. The paper discusses implications for financial management and emphasizes embedding resiliency-based frameworks in local government strategic planning