Accelerating Municipal Bond Market Development in Emerging Economies: An Assessment of Strategies and Progress
The advantages of using municipal bonds to finance urban infrastructure are increasingly evident to policymakers in emerging economies, some of whom are undertaking efforts to accelerate the development of municipal bond markets in their countries. Many of these efforts use the strengths of the U.S. municipal market as a guide to suggest the kinds of market characteristics necessary to attract issuers as well as investors to the marketplace. Features of the U.S. market are often difficult to recreate in these countries in the short run, but policymakers are using a variety of innovative techniques to approximate essential market characteristics. This article reviews these efforts in four emerging economies: Indonesia, the Philippines, Poland, and South Africa.
How Well Do Subnational Borrowing Regulations Work?
There are many positive things associated with subnational borrowing, including additional funding or promoting intergenerational equity. But it may also endanger fiscal sustainability and macro stability due to moral hazard and soft budget constraints. Thus borrowing controls are justified and also common. In this paper we review the different types of ex-ante and ex-post regulations used the international experience based on a large panel of developed and developing countries. Effectiveness or borrowing regulations in this paper is defined relative to the ability to preserve primary balances at the general government and subnational levels. There is a wide variety of both ex-ante and ex-post sub-national borrowing regulations that countries implement. Each has both advantages and disadvantages, with different suitability countries’ circumstances. For example, depth of financial markets is important when choosing market-based regulations. The presence of subnational tax autonomy contributes to an increase in the general government primary balance, but not significantly for subnational primary balances. A history of subnational bailouts is associated with lower primary balances on average at all levels. The “golden rule” (borrowing is only for capital investment purposes) and limits on debt and borrowing appear effective at all levels of government. However, we find that none of the broad types of sub-national borrowing regulations seem to have a distinct significant direct effect on the narrow definition of fiscal sustainability at the subnational level.
Deliberative Democracy and the Resource Curse: A Nationwide Experiment in Tanzania
Oil and gas discoveries in developing countries are often associated with short-sighted economic policies and, in response, calls to insulate resource management from populist impulses. We report on a randomized experiment testing methods to overcome this apparent tension between sound resource governance and democratic politics. Soon after Tanzania’s discovery of major natural gas reserves, we invited a nationally representative sample of voters to an intensive public deliberation of policy options featuring nationally recognized experts and small-group discussions. Democratic deliberation reinforced the public’s strong preference for rapid spending of gas revenues, but also increased support for various prudential and economically orthodox measures, including independent oversight of gas revenues, limits on government borrowing, and selling gas abroad rather than subsidizing fuel at home. These effects were driven by deliberation per se, rather than a pure information treatment, and show no evidence of contamination by facilitatoror peer-effects in group deliberations. www.cgdev.org Justin Sandefur, Nancy Birdsall, James Fishkin, and Mujobu Moyo