Abstract

RUELAS-AVILA, Ignacio; JIMENEZ, Juan-Pablo  and  LETELIER-SAAVEDRA, Leonardo. Debt Decisions in Municipalities in the Face of Subnational Fiscal Rule: Evidence and Policy Lessons. Gest. polít. pública [online]. 2023, vol.32, n.2, pp.97-129.  Epub Feb 19, 2024. ISSN 1405-1079.  https://doi.org/10.60583/gypp.v32i2.8122.

This paper studies local governments’ decisions on public debt under the Financial Discipline Law for States and Municipalities (LDFEM in Spanish) in Mexico. It implies distinguishing economic and political factors and their relevance within LDFEM’s legal framework that defines norms and limitations for Mexican subnational governments. Based on municipal data for 2017-2019, our results prove that political variables significantly impact municipal debt. This paper highlights the elections’ proximity and the incumbent mayor’s electoral support.

Keywords : public debt of local governments; intergovernmental fiscal relations; fiscal federalism; fiscal rules.