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 supervisory approval in the budgeting process when facing fiscal imbalances. Using an event-study design with staggered treatment adoption, we find that municipalities increase local tax rates on property and business profits, but only property tax hikes translate into higher revenues. Additional revenue gains arise through higher transfers from the state via the fiscal equalization system. Beyond the core budget, we document a novel adjustment margin: net expenditures for enterprises under municipal control rise following supervision. These results suggest that extended fiscal oversight affects not only municipal budgetary decisions but also the financial behavior of municipally owned enterprises.

This study assesses the sustainability and threshold levels of public debt in India’s federal system using data from 1990-91 to 2024-25, applying fiscal policy response functions and threshold regression. The results indicate that central government debt is weakly sustainable with a threshold of 52.16%, while state government debt is strongly sustainable with a threshold of 22.24%. As current debt levels constrain growth, fiscal discipline is crucial. Debt simulations suggest that maintaining 12% nominal GDP growth and a fiscal deficit of 3% for the Centre and flexible, state-specific targets averaging 2.5% from 2025-26 onwards would ensure sustainability. Under these conditions, the Centre could meet its target before the Viksit Bharat 2047 deadline and support States through on-lending, low-interest loans, targeted grants, or debt consolidation, without undermining development priorities. The study also underscores the need for revenue augmentation and rationalised spending, particularly by cutting unproductive subsidies, to safeguard 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.