NDLI: The effectiveness of institutional borrowing restrictions: Empirical evidence from Spanish municipalities

Content Provider	Springer Nature Link
Author	Cabasés, Fermín Pascual, Pedro Vallés, Jaime
Copyright Year	2006
Abstract	The need for restrictions on borrowing by subnational governments is a generally accepted notion that is justified both by public choice theory and by the fact that such restrictions are in force in the majority of decentralized countries. Furthermore, recent breaches of the Stability and Growth Pact of the European Union have led to the introduction of legislative tools aimed at balancing the budget at all levels of government have come to the forefront of interest in European public finance research. This paper is concerned with the financial situation and debt level of Spanish municipalities from 1988 to 2000. We have two main objectives: the first is to assess the value of mandatory limitations on municipal borrowing and past trends in the borrowing policies adopted by Spanish local authorities. The second is to develop an econometric model using panel data stratified by population size to measure indebtedness in Spanish municipalities. These measures enable us to formulate a series of hypotheses to explain municipal borrowing practices, which are then tested empirically. The evidence thus obtained appears to support the effectiveness of institutional borrowing restrictions to introduce some financial discipline in the borrowing policies adopted by local governments in Spain.
Starting Page	293
Ending Page	313
Page Count	21
File Format	PDF
ISSN	00485829
Journal	Public Choice
Volume Number	131
Issue Number	3-4
e-ISSN	15737101
Language	English
Publisher	Kluwer Academic Publishers-Plenum Publishers
Publisher Date	2006-12-15
Publisher Place	New York
Access Restriction	One Nation One Subscription (ONOS)
Subject Keyword	Municipal indebtedness Institutional restrictions Net savings Debt service Political Science Public Finance & Economics
Content Type	Text
Resource Type	Article
Subject	Sociology and Political Science Economics and Econometrics

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