In this study, we analyze the cyclicality of fiscal policies in China during the period 1978-2013. We find that the cyclicality of local government spending in China significantly affects the cyclicality of total government spending. By employing both time-series and province-level panel data,...

I formulate a political-economy model of a fiscal union where the threat of secession imposes a limit on fiscal redistribution between regions. I argue that the trade-off between implementing the region's preferred fiscal policy and benefiting from inter-regional risk sharing depends on the...

We examine whether US and German state governments pursue sustainable fiscal policies taking into account fiscal transfers. Using panel data techniques we investigate whether the debt-to-GDP ratio had a positive influence on the primary surplus (Bohn-model). We show that including/excluding...

In the wake of the euro area crisis, the debate on instruments to deepen economic integration among its members has intensified, among others putting forward a fiscal stabilization capacity for EMU members. Contributions made so far to further this idea have mostly concentrated on the...

In this paper we investigate the interplay between national rainy-day funds and supra-national transfers in a fiscal union. Given that the EU has established rules limiting deficits, national rainy-day funds could in theory provide a way for countries to obey the rules and use fiscal policy, yet...

Most of the EU budget is spent on redistribution. Large sums of money are transferred from the member state governments to Brussels and back to these governments. Some member states end up as net receivers and some as net payers. Most economists agree that the resources of the budget should be...

Recent theoretical research suggests that financing sub-national governments’ expenditure out of own revenue sources is linked to more responsible budgeting, because the financial implications of spending decisions then are internalized within a jurisdiction. We test this proposition...

It is widely debated whether a monetary union has to be accompanied by a fiscal transfer scheme to accommodate asymmetric shocks. We build a model of a monetary union with a central bank and two heterogeneous countries that are linked by a fiscal transfer scheme with repercussions on monetary...

We study the fiscal and tax response to intergovernmental grants, exploiting quasi-experimental variation within Germany’s fiscal equalization scheme triggered by Census revisions of official population counts. Municipal budgets do not adjust instantly. Instead, spending and investments adapt...