Search Results for: Borrowing

Excessive borrowing by local and regional governments is an important source of macroeconomic instability in monetary unions. Credit markets often indulge this behaviour (lending too much at excessively low interest rates) if they expect national officials to bail out struggling local jurisdictions. Drawing on cross-national and Canadian data, Hanniman discussed the role and limits of fiscal federal institutions in shaping these bailout beliefs.
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Since municipal sector spending represents almost 14% of Hungarian GDP, imbalances in municipal finance have a measurable effect at the macroeconomic level. The current government is setting new rules on local borrowing. With the rare two-thirds majority in parliament, it has the chance to introduce long awaited reforms, although they are likely to be met by intense opposition at the local level.
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