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Subnational Fiscal Policy in Large Developing Countries: Some Lessons from the 2008-09 Crisis for Brazil, China and India

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dc.contributor.author Fardoust, Shahrokh
dc.contributor.author Ravishankar, V.J.
dc.date.accessioned 2013-07-10T18:35:43Z
dc.date.available 2013-07-10T18:35:43Z
dc.date.issued 2013-04
dc.identifier.uri http://hdl.handle.net/10986/14447
dc.description.abstract In response to the Great Recession of 2008, many national governments implemented fiscal stimuli packages in 2009 and 2010 to prevent further declines in aggregate demand and to jump start their economic recovery. Where subnational governments responded with fiscal contraction, as in the United States, the impact was muted; where states/provinces also expanded expenditures, as in China and India, the impact was magnified. Increases in recurrent expenditure, which were made in Brazil and India, acted as short-term stimulants; additional public investment, as in China, appears to have had a more lasting impact on growth. Large developing countries typically exhibit high interregional inequality in levels of development and global integration, resulting in differential magnitude and timing of the crisis impact. For example, coastal states in India were affected more severely and quickly than landlocked states; revenue moved in opposite directions in the two types of state in 2009. Where fiscal stress varies widely across subnational entities, central transfers alone cannot prevent pro-cyclicality of subnational fiscal response to a recession. There is need for flexibility in subnational borrowing within a sustainable fiscal framework. Many Indian states were able to maintain or accelerate their spending thanks to the additional borrowing permitted in 2009 and 2010. In comparison, limited borrowing capacity and lack of flexibility in federal grants restricted the contribution of Brazilian states to fiscal stimulus. Legal prohibition of subnational borrowing induced China's provinces to finance additional investments through extra-budgetary borrowing by nongovernment entities, with significant fiscal risks on account of contingent liabilities. en
dc.language English
dc.language.iso en_US
dc.publisher World Bank, Washington, D.C.
dc.relation.ispartofseries Policy Research Working Paper;No.6409
dc.rights CC BY 3.0 IGO
dc.rights.uri http://creativecommons.org/licenses/by/3.0/igo/
dc.subject PRICE MOVEMENTS
dc.subject MARKET DISCIPLINE
dc.subject CAPITAL PROJECTS
dc.subject REVENUE SHORTFALL
dc.subject BENEFICIARY
dc.subject BANK FAILURES
dc.subject CENTRAL REVENUES
dc.subject PERSONAL INCOME
dc.subject PUBLIC ENTERPRISES
dc.subject INTERNATIONAL BANK
dc.subject FISCAL SPACE
dc.subject LIMITED BORROWING CAPACITY
dc.subject FISCAL IMPACT
dc.subject INDEBTED COUNTRIES
dc.subject NET CURRENT REVENUE
dc.subject TAX REVENUE
dc.subject FISCAL FEDERALISM
dc.subject MACROECONOMIC EFFECTS
dc.subject PRIVATE CREDIT
dc.subject GROSS DOMESTIC PRODUCT
dc.subject BANK CREDIT
dc.subject PRIVATE INVESTMENT
dc.subject FISCAL BALANCE
dc.subject SUBNATIONAL
dc.subject PUBLIC FINANCES
dc.subject EXPENDITURE NEEDS
dc.subject POLICY MAKERS
dc.subject STAMP DUTY
dc.subject INTEREST BURDEN
dc.subject TRANSPORT
dc.subject CENTRAL GOVERNMENTS
dc.subject PRIVATE CAPITAL INFLOWS
dc.subject EXTERNAL BORROWING
dc.subject EXPENDITURE CONTRACTION
dc.subject TAX
dc.subject DEVELOPING COUNTRIES
dc.subject FEDERAL COUNTRY
dc.subject FOREIGN DIRECT INVESTMENT
dc.subject PROVINCES
dc.subject BINDING CONSTRAINT
dc.subject CAPITAL INVESTMENT
dc.subject PUBLIC EMPLOYEES
dc.subject SUBNATIONAL UNITS
dc.subject LEGAL PROHIBITION
dc.subject MUNICIPAL GOVERNMENTS
dc.subject POLICY RESPONSE
dc.subject PROVINCIAL GOVERNMENTS
dc.subject RESERVE
dc.subject ECONOMIC TRANSACTIONS
dc.subject GOVERNMENT REVENUE
dc.subject HOUSING
dc.subject RECURRENT EXPENDITURE
dc.subject PUBLIC CONSUMPTION
dc.subject PORTFOLIO
dc.subject SUBNATIONAL GOVERNMENT EXPENDITURES
dc.subject BAILOUT
dc.subject REVENUE COLLECTIONS
dc.subject CREDITORS
dc.subject AVAILABILITY OF CREDIT
dc.subject REAL INTEREST RATES
dc.subject CAPITAL FLOWS
dc.subject INVESTMENT DECISIONS
dc.subject HOUSING PRICES
dc.subject FEDERAL COUNTRIES
dc.subject REAL INTEREST
dc.subject DEBT SERVICE
dc.subject AGGREGATE EXPENDITURE
dc.subject GLOBAL MARKET
dc.subject BANKING SYSTEM
dc.subject EQUALIZATION
dc.subject GOVERNMENT BANKRUPTCY
dc.subject INVESTMENT CLIMATE
dc.subject FEDERAL GRANTS
dc.subject LEGISLATION
dc.subject AUTONOMY
dc.subject LEVY
dc.subject LOAN CATEGORIES
dc.subject FISCAL DEFICIT
dc.subject DEBT RELIEF
dc.subject GOVERNMENT POLICY
dc.subject DOMESTIC BANKING
dc.subject INTEREST RATES
dc.subject NATIONAL TREASURY
dc.subject SUBNATIONAL GOVERNMENT
dc.subject DEBT FLOWS
dc.subject AGGREGATE DEBT
dc.subject TAX REVENUES
dc.subject ACCOUNTING
dc.subject REGISTRATION FEES
dc.subject FINANCIAL CRISIS
dc.subject SUBNATIONAL GOVERNMENT FINANCE
dc.subject FISCAL POLICIES
dc.subject CAPITAL INFLOWS
dc.subject HUMAN CAPITAL
dc.subject CURRENT EXPENDITURES
dc.subject INDEBTEDNESS
dc.subject MUNICIPALITIES
dc.subject FINANCIAL DISTRESS
dc.subject DOMESTIC BORROWING
dc.subject SUBNATIONAL FINANCES
dc.subject DEBT LEVELS
dc.subject CAPITAL EXPENDITURE
dc.subject LAWS
dc.subject SUB-NATIONAL GOVERNMENTS
dc.subject INSTRUMENT
dc.subject CONSTITUTIONAL MANDATE
dc.subject FISCAL BURDEN
dc.subject MONETARY POLICY
dc.subject SUBNATIONAL ENTITIES
dc.subject REVENUE RATIO
dc.subject SUBNATIONAL DEBT
dc.subject SUB-NATIONAL
dc.subject SAVINGS
dc.subject ECONOMIC CONDITIONS
dc.subject EXPENDITURES
dc.subject INFRASTRUCTURE INVESTMENT
dc.subject PRIVATE CAPITAL
dc.subject CREDIT MARKET
dc.subject FISCAL DECENTRALIZATION
dc.subject GOVERNMENT EXPENDITURES
dc.subject GOVERNMENT DEFICITS
dc.subject REVENUE GROWTH
dc.subject COLLATERAL
dc.subject MORAL HAZARD
dc.subject CONSUMER DURABLES
dc.subject OUTSTANDING DEBT
dc.subject LEVEL OF DEBT
dc.subject CENTRAL GOVERNMENT
dc.subject GLOBAL ECONOMY
dc.subject POLICY DECISION
dc.subject COMPARATIVE ANALYSIS
dc.subject SAFETY NET
dc.subject FISCAL FRAMEWORK
dc.subject GOVERNMENT EXPENDITURE
dc.subject GOVERNMENT SPENDING
dc.subject REVENUE SHARING
dc.subject CIVIL SERVICE
dc.subject PURCHASING POWER
dc.subject EMPLOYMENT
dc.subject DOMESTIC BANK
dc.subject BANK LOANS
dc.subject DEVOLUTION
dc.subject DOMESTIC BANKS
dc.subject MINISTRY OF FINANCE
dc.subject GOVERNMENT REVENUES
dc.subject INCOME LEVEL
dc.subject MONETARY POLICIES
dc.subject TAX SHARING
dc.subject PUBLIC DEBT
dc.subject TAX COLLECTIONS
dc.subject DEVELOPMENT BANK
dc.subject CENTRAL SPENDING
dc.subject INVESTMENT FLOWS
dc.subject PUBLIC FINANCE STATISTICS
dc.subject CONTINGENT LIABILITIES
dc.subject SUBNATIONAL GOVERNMENTS
dc.subject GOVERNMENT DEBT
dc.subject POLICY RESPONSES
dc.subject BANK FINANCING
dc.subject EMERGING MARKETS
dc.subject PUBLIC INVESTMENT
dc.subject EXPENDITURE
dc.subject STATE EXPENDITURES
dc.subject TOTAL EXPENDITURES
dc.subject MUNICIPALITY
dc.subject BANK POLICY
dc.subject COMMERCIAL BANKS
dc.subject LOAN
dc.subject REVENUE BASE
dc.subject TOTAL EXPENDITURE
dc.subject PORTFOLIO INVESTMENT
dc.subject CENTRAL TRANSFERS
dc.subject TAX BENEFITS
dc.subject FISCAL POLICY
dc.subject CREDIT FLOWS
dc.subject DEFAULT RATES
dc.subject MEDIUM-TERM FISCAL
dc.subject EMERGING ECONOMIES
dc.subject SUBNATIONAL DEFICITS
dc.subject DEBT CRISIS
dc.subject FEDERALISM
dc.subject FISCAL DEFICITS
dc.subject LOCAL GOVERNMENT
dc.subject MONETARY FUND
dc.subject STATE GOVERNMENTS
dc.subject FINANCIAL INSTITUTIONS
dc.subject INFLATION
dc.subject SUB-NATIONAL FINANCES
dc.subject FISCAL BALANCES
dc.subject FINANCIAL SYSTEM
dc.subject SUBNATIONAL FINANCE
dc.subject FISCAL ADJUSTMENT
dc.subject RESERVE BANK OF INDIA
dc.subject SUBNATIONAL EXPENDITURES
dc.subject MACROECONOMIC IMPACT
dc.subject SUBNATIONAL GOVERNMENT FINANCES
dc.subject EXPENDITURE CUTS
dc.subject INVESTMENT PROJECTS
dc.subject PUBLIC FINANCE
dc.subject PUBLIC INVESTMENTS
dc.subject ENTERTAINMENT TAXES
dc.subject CREDIT MARKETS
dc.subject FINANCIAL MANAGEMENT
dc.subject CORPORATE INVESTMENT
dc.subject INTERNATIONAL CREDIT
dc.subject STATE GOVERNMENT
dc.subject BUDGET DEFICIT
dc.subject INFRASTRUCTURE INVESTMENTS
dc.subject PUBLIC SPENDING
dc.subject INTERGOVERNMENTAL TRANSFERS
dc.subject RESERVE BANK
dc.subject DECENTRALIZATION
dc.title Subnational Fiscal Policy in Large Developing Countries: Some Lessons from the 2008-09 Crisis for Brazil, China and India en
dc.rights.holder World Bank


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