Local Government Public Debt Rules in the Visegrad Group Countries as Tools for the Optimization of Socio-Economic Development

  • Marta Postula University of Warsaw, Faculty of Management
  • Jarosław Klepacki University of Social Sciences, Institute of Economics
  • Justyna Sobolewska University of Warsaw, Faculty of Management
Keywords: Sub-central government, fiscal rules, fiscal discipline, indicators, calibration


The use of fiscal rules as an instrument of fiscal sustainability is manifested, most of all, by imposing the requirements as regards borrowing and the costs of public debt service, and most research is conducted in this context. In this article, the Authors ask a different question altogether: does the right selection of calibration factors for fiscal rules with respect to debt, as applied at Visegrad Group’s local government entities, have an impact on the fiscal discipline, on the one hand, and on the other, is it a factor contributing to sustainable socio-economic development of regions? A mixed method, one combining the results of qualitative and quantitative research, will be used to empirically verify the hypotheses related to the research problem presented.


Agénor, P. R., Yilmaz, S. D. (2011) The tyranny of rules: fiscal discipline, productive spending, and growth in a perfect foresight model, Journal of Economic Policy Reform, 14(1), pp. 69-99, http://dx.doi.org/10.1080/17487870.2010.503086.

Alesina A., Perotti P. (1995) Fiscal Expansions and Fiscal Adjustments in OECD Countries, NBER Working Paper, No. 5214 (Cambridge, MA: National Bureau of Economic Research).

Alfaro, L. & Kanczuk, F. (2016) Fiscal rules and sovereign default, Harvard Business School Working Paper No. 16-134 (Boston: Harvard Business School).

Balatoni, A. (2015) A simple fiscal rule for Hungary, Acta Oeconomica, 65, pp. 149-159, https://doi.org/10.1556/032.65.2015.S1.9.

Berti, K., Colesnic, E., Desponts, C., Pamies Sumner, S. & Sail, E. (2016) Fiscal Reaction Functions for European Union Countries, European Economy – Discussion Paper 028 (Luxembourg: Publications Office of the European Union).

Baxa, J &, Paulus, M. (2016) New Fiscal Rules for the Czech Republic: analysis of the proposal, IES Occasional Paper, 1/2016 (Prague: Charles University).

Bergman, U. M. & Hutchison. M. M. (2015) Economic Stabilization in the Post-Crisis World: Are Fiscal Rules the Answer?, Journal of International Money and Finance, 52, pp. 82-101, https://doi.org/10.1016/j.jimonfin.2014.11.014.

Bova, E., Kinda, T., Muthoora, P. & Toscani, F. (2015) Fiscal Rules at a Glance, updated version of IMF Working Paper, No 12/273 (Washington: International Monetary Fund).

Bova, E., Carcenac. N. & Guerguil, M. (2014) Fiscal Rules and the Procyclicality of Fiscal Policy in the Developing World, IMF Working Papers No. 14/122 (Washington: International Monetary Fund).

Brender, A. & Drazen A. (2005) Political Budget Cycles In New Versus Established Democracies, Journal of Monetary Economics, 52, pp. 1271-1295, https://doi.org/10.3386/w10539.

Calmfors, L. (2015) The roles of fiscal rules, fiscal councils and fiscal Union in EU Integration, IFN Working Paper, No 1076/2015 (Stickholm: Research Institute of Industrial Economics).

Chapman, J. I. (2008) State and Local Fiscal Sustainability: The Challenges, Public Administration Review, 68(1), pp. 115-131, https://doi.org/10.1111/j.1540-6210.2008.00983.x.

Creel, J. (2003) Ranking Fiscal Policy Rules: The Golden Rule of Public Finance vs. the Stability and Growth Pact, Documents de Travail de l'OFCE 2003-04 (Paris: L’Observatoire français des conjonctures économiques).

Debrun, X., Moulin, L., Turrini, A., Ayuso-i-Casals, J. & Kumar, M. S. (2008) Tied to the mast? national fiscal rules in the European Union, Economic Policy, 23(54), pp. 298-362, https://doi.org/10.1111/j.1468-0327.2008.00199.x.

Dixit A., Lambertini L. (2001) Monetary-Fiscal Policy Interactions and Commitment Versus Discretion in a Monetary Union, European Economic Review, 45(4-6), pp. 977-987, https://doi.org/10.1016/S0014-2921(01)00134-9.

Djalilov, K., Holscher, J. (2016) Regulations, market power and stability in the banking sector of transition countries, LIMES – Journal of Social Sciences and Humanities, 1, pp. 77-94.

Drazen, A. (2004) Fiscal rules from a political economy perspective In: Kopits, G. (ed.) Rules-based Fiscal Policy in Emerging Markets (Heidelberg: Springer).

Egger P. & Koethenbuerger M. (2010) Government Spending and Legislative Organization: Quasi-experimental evidence from Germany, EPRU Working Paper Series, 2010-09, (Copenhagen: Economic Policy Research Unit).

European Commission (2010) National Fiscal Governance Reforms across EU Member States. Analysis of the information contained in the 2009 2010 Stability and Convergence Programmes, European Economy, Occasional Papers, 67 (Brussels, European Commission).

European Commission (2016) Fiscal Sustainability Report 2015, European Economy – Institutional paper, 018 (Luxembourg: Publications Office of the European Union).

Goliaš, P., Jurzyca, E. (2013) Solutions to the debt crisis in the EU from Slovak perspective (Bratislava: Institute for Economic and Social Reforms – INEKO).

Hallerberg, M., Strauch, R. & von Hagen, J. (2007) The design of fiscal rules and forms of governance in European Union countries, European Journal of Political Economy, 23(2), pp. 338-50, https://doi.org/10.1016/j.ejpoleco.2006.11.005.

Hagen von, J. & Wolf, G. B. (2004) What do deficits tell us about debt? Empirical evidence on creative accounting with fiscal rules in the EU, Deutsche Bundesbank, Discussion Paper, 38/2004 (Frankfurt: Deutsche Bundesbank).

IMF (2016) Fiscal Rules at a Glance, Background Paper, updated version of IMF Working Paper, No 12/273 (Washington, D.C.: IMF).

Izák, V. (2004) Public Debt Service, Interest Rates and Fiscal Variables in Transition Countries, Prague Economic Papers, 13(1), pp. 3-15. https://doi.org/10.18267/j.pep.227.

Kasdin, S. (2018) Budgeting Rules and Program Outcomes, Public Administration Review, https://doi.org/10.1111/puar.12908.

Kluza, K. (2016) Sustainability of local government sector debt. Evidence from monte-carlo simulations, Lex Localis – Journal of Local Self-Government, 14(1), pp. 115-132, https://doi.org/10.4335/14.1.115-132(2016).

Lentner, C. (2014) The Debt Consolidation of Hungarian Local Governments, Public Finance Quarterly, 53, pp. 310-325.

Moździerz, A. (2015) Strengthening the post-crisis fiscal rules – the case of Spain, Slovakia and Sweden. Equilibrium, Quarterly Journal of Economics and Economic Policy, 10(2), pp. 31-52, http://dx.doi.org/10.12775/EQUIL.2015.012.

OECD (2016) Monitoring sub-central government debt: Trends, challenges and practices, In: Blöchliger, H. & Kim, J. (eds.) Fiscal Federalism 2016: Making Decentralisation Work (Paris: OECD Publishing).

Postuła, M. (2017) Success Factors in the Fiscal Consolidation Process, SSRN, http://dx.doi.org/10.2139/ssrn.2963500.

Rodríguez Bolívar, M. P., Navarro Galera, A., Alcaide Muñoz, L. & López Subirés, M. D. (2014) Factors influencing local government financial sustainability: An empirical study Lex Localis – Journal of Local Self-Government, 12(1), pp. 31-54, https://doi.org/10.4335/12.1.31-54(2014).

Reinhart, C.M., Rogoff, K.S. (2010) Growth in a Time of Debt, American Economic Review: Papers & Proceedings, 100(2), pp. 573–578, https://doi.org/10.1257/aer.100.2.573.

Reuter, W. H. (2015) National numerical fiscal rules: not complied with, but still effective?, European Journal of Political Economy, 39, pp. 67-81, https://doi.org/10.1016/j.ejpoleco.2015.04.002.

Roubini, N. & Sachs, J. D. (1989) Political and economic determinants of budget deficits in the industrial democracies, European Economic Review, 33(5), pp: 903-933, https://doi.org/10.1016/0014-2921(89)90002-0.

Schick, A. (2010) Post-crisis Fiscal Rules: Stabilising Public Finance while Responding to Economic Aftershocks, OECD Journal of Budgeting, 2.

Shi, M. & Svensson, J., (2006) Political budget cycles: Do they differ across countries and why?, Journal of Public Economics, 90, pp. 1367-1389, https://doi.org/10.1016/j.jpubeco.2005.09.009.

Wyplosz, C. (2013) Fiscal rules: theoretical issues and historical experiences In: Alesina, A. & Giavazzi F. (eds.) Fiscal Policy after the Financial Crisis (Chicago: University of Chicago Press).