On the Determinants of Fiscal Non-Compliance: An Empirical Analysis of Spain's Regions

35 Pages Posted: 28 Dec 2016

See all articles by Mar Delgado-Téllez

Mar Delgado-Téllez

Banco de España

Victor Lledo

International Monetary Fund (IMF)

Javier J. Pérez

Banco de España - Research Department

Multiple version iconThere are 2 versions of this paper

Date Written: December 28, 2016

Abstract

This paper proposes an empirical framework that distinguishes between voluntary and involuntary compliance with fiscal deficit targets on the basis of economic, institutional and political factors. The framework is applied to Spain’s Autonomous Communities (regions) over the period 2002-2015. Fiscal non-compliance among Spain’s regions has proven persistent. It increases with the size of growth forecasting errors and the extent to which fiscal targets are tightened, factors not fully under the control of regional governments. Non-compliance also tends to increase during election years, when vertical fiscal imbalances become accentuated, and market financing costs subside. Strong fiscal rules have not shown any significant impact on containing fiscal noncompliance. Reducing fiscal non-compliance in multi-level governance systems such as Spain’s requires a comprehensive assessment of inter-governmental fiscal arrangements that looks beyond rules-based frameworks by ensuring enforcement procedures are politically credible.

Keywords: fiscal compliance, rules, fiscal federalism, soft budget constraints

JEL Classification: H61, H68, H72, H77

Suggested Citation

Delgado-Téllez, Mar and Lledo, Victor and Perez, Javier J., On the Determinants of Fiscal Non-Compliance: An Empirical Analysis of Spain's Regions (December 28, 2016). Banco de Espana Working Paper No. 1632. Available at SSRN: https://ssrn.com/abstract=2890859 or http://dx.doi.org/10.2139/ssrn.2890859

Mar Delgado-Téllez (Contact Author)

Banco de España ( email )

Alcala 50
Madrid 28014
Spain

Victor Lledo

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Javier J. Perez

Banco de España - Research Department ( email )

Alcala 50
28014 Madrid
Spain

HOME PAGE: http://www.bde.es/investigador/staff/95.htm

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