02004cas a2200253 a 4500 AALejournalIMF017361 230101c9999 xx r poo 0 0eng d 5.00 USD 9781475569971 1018-5941 BD-DhAAL BD-DhAAL Forni, Lorenzo. Fiscal Rules to Tame the Political Budget Cycle : Evidence from Italian Municipalities / Lorenzo Forni, Andrea Bonfatti. Washington, D.C. : International Monetary Fund, 2017. 1 online resource (20 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students The paper provides evidence that fiscal rules can limit the political budget cycle. It focuses on the application of the Italian fiscal rule at the sub-national level over the period 2004-2006 and shows that: 1) municipalities are subject to political budget cycles in capital spending; 2) the Italian subnational fiscal rule introduced in 1999 has been enforced by the central government; 3) municipalities subject to the fiscal rule show more limited political budget cycles than municipalities not subject to the rule. In order to identify the effect, we rely on the fact that the domestic fiscal rule does not apply to municipalities below 5,000 inhabitants. We find that the political budget cycle increases real capital spending by about 35 percent on average in the years prior to municipal elections and that the sub-national fiscal rule reduces these figures by about two thirds. Mode of access: Internet Bonfatti, Andrea. IMF Working Papers; Working Paper ; No. 2017/006 Full text available on IMF http://elibrary.imf.org/view/journals/001/2017/006/001.2017.issue-006-en.xml IMF e-Library