Click here for search results
Subnational fiscal policy in large developing countries : some lessons from the 2008-09 crisis for Brazil, China and India, Volume 1
Author:Fardoust, Shahrokh; Ravishankar, V.J.; Country:India; China; Brazil;
Date Stored:2013/04/15Document Date:2013/04/01
Document Type:Policy Research Working PaperSubTopics:Debt Markets; Public Sector Economics; Subnational Economic Development; Banks & Banking Reform; Access to Finance
Language:EnglishRegion:Latin America & Caribbean; South Asia; East Asia and Pacific
Report Number:WPS6409Collection Title:Policy Research working paper ; no. WPS 6409
Volume No:1  

Summary: 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.

Official Documents
Official, scanned versions of documents (may include signatures, etc.)
File TypeDescriptionFile Size (mb)
PDF 41 pagesOfficial version*2.87 (approx.)
TextText version**
How To Order

* The official version is derived from scanning the final, paper copy of the document and is the official,
archived version including all signatures, charts, etc.
** The text version is the OCR text of the final scanned version and is not an accurate representation of the final text.
It is provided solely to benefit users with slow connectivity.

Permanent URL for this page: