What are the cyclical properties of U.S. state and local government fiscal policy? The budget surplus of local and, in particular, state governments is procyclical, smoothing disposable income and consumption of state residents. This happens over both short- and medium-term horizons. Procyclical...

Recent studies on vertical fiscal imbalance (VFI) in Canada subscribe to a definition of VFI that is based on the mismatch in structural budget balances between the federal and provincial/territorial levels of government. In this framework, projected budget balances illustrate the path of VFI....