Cyclically Adjusted Local Government Balances
46 Pages Posted: 2 Feb 2013
Date Written: December 20, 2012
The paper provides an analysis of cyclically-adjusted budget balances of local governments in Italy for the period 2002-07. We find that local government balances appear to be relatively sensitive to the business cycle. In particular, a shock of 1 per cent in GDP changes their resources by approximately 0.6 billion. Within the sample period, both central and local policies concerning local government budgets had a sizeable impact on local government balances in cyclically-adjusted terms.
Keywords: local public finance, budget sensitivity, business cycle, tax elasticity
JEL Classification: E32, E62, H71
Suggested Citation: Suggested Citation