This paper examines the interaction between the executive and legislature in public finance, using unique data from Italian municipalities. Utilizing a generalized difference-in-difference strategy, it finds that a larger presence of executive politicians leads to increased expenditures, primarily driven by higher investments financed through capital transfers, while a larger number of councilors constrains public spending. These patterns reflect specialization within a larger executive body and political fragmentation within the council. Voters respond positively to the additional spending by the executive, supporting upward career movements for the mayor and reappointment of executive board members, whereas councilors do not benefit from their spending behavior. This research enhances understanding of the complex relationship between political class size and state finances, which has been found ambiguous in existing literature.

We examine how municipalities in the German state of North Rhine-Westphalia respond to the requirement of submitting a consolidation plan in the face of budgetary imbalances. Using an event-study approach with staggered treatment adoption, we compare municipalities facing this requirement to those in similar fiscal situations that are not obligated to submit a plan. We find that municipalities required to submit a plan focus on revenue adjustments. Beyond this, we highlight a largely overlooked strategy: municipalities increasingly turn to their state-owned enterprises to offload investment tasks. Our findings suggest extended fiscal supervision not only shapes municipal core budgets but also triggers creative consolidation strategies.

This study examines the sustainability and threshold levels of public debt across different tiers of government in India using data from 1990-91 to 2020-21, applying the fiscal policy response function and threshold regression method. The findings indicate that both central and state government debt levels are unsustainable, with estimated sustainability thresholds of 40% for the Centre and 22% for the states. As the current debt levels impede economic growth, fiscal discipline is essential. Debt dynamics simulations suggest that maintaining a nominal GDP growth rate of 12% and a fiscal deficit target of 2% for both the Centre and states from 2024-25 onwards would help achieve debt sustainability. Under these conditions, the Centre could meet its target by 2027-28, while states could do so by 2030-31. The study emphasizes the need for revenue augmentation and expenditure rationalization, particularly reducing unproductive subsidies, to ensure long-term fiscal stability.

This paper explores the effects of formal limits on US municipal debt. Based on a theoretical analysis of fiscal policy under uncertainty, we argue that governments facing a debt limit may take precautions, in order to keep budget flexibility if adverse shocks are realized. To test this prediction, we use a panel of US municipalities and exploit institutional variation in existence and height of state-imposed debt limits. Our preliminary results suggest that US municipalities follow a prudent debt policy and plan for lower levels of debt when facing debt limits. When we look at total debt rather than the type of debt that is regulated by the statutory debt limit, the effect of the debt limit appears much weaker, which raises doubts about its overall effectiveness.