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

34 Pages Posted: 7 Mar 2017

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: January 2017

Abstract

This paper proposes an empirical framework that distinguishes voluntary from 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 noncompliance among Spain's regions has shown to be persistent. It increases with the size of growth forecast 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 accentuate, and market financing costs subside. Strong fiscal rules have not shown any significant impact in containing fiscal non-compliance. Reducing fiscal non-compliance in multilevel governance systems such as the one in Spain requires a comprehensive assessment of intergovernmental fiscal arrangements that looks beyond rules-based frameworks by ensuring enforcement procedures are politically credible.

Keywords: Fiscal policy, Spain, State taxation, Regional economics, 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 (January 2017). IMF Working Paper No. 17/5. Available at SSRN: https://ssrn.com/abstract=2924368

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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