Municipality Budget Rules and Debt: Is the Italian Regulation Effective?. (6th July 2016)

• Record Type: Journal Article
• Authors: Monacelli, Daniela; Pazienza, Maria Grazia; Rapallini, Chiara
• Is Part Of: Public budgeting & finance. Volume 36:Number 3(2016:Autumn)
• Page Start: 114
• Page End: 140
• Publication Date: 2016-07-06
• Subjects: Budget -- United States -- Periodicals; Budget -- Periodicals; 352.4
• DOI: 10.1111/pbaf.12094
• Languages: English
• ISSNs: 0275-1100

Abstract

Abstract : This article studies the local fiscal rules in force in Italy—the Domestic Stability Pact and debt constraints—that have been adopted to coordinate levels of government and be compliant with the European Stability and Growth Pact. The aim is to assess the effects of such rules on local borrowing and investments, the latter being crucial for growth. To this end, a dataset of Italian municipality budgets from 1999 to 2009 is exploited. The analysis shows that fiscal rules help to control local debt, but they have also led to a sharp decrease in investments, especially among compliant municipalities