| Popis: |
Do you need to have strong democracies (and rule of law) to create good fiscal policy? The academic literature highlights that fiscal rules are necessary but they become insufficient to manage subnational debt (Ter-Minassian 1997, Kornai, 1998, Alesina et al., 1999, Rodden 2004; Rodden 2006). There are several conditions of oversite which are also necessary to manage subnational debt before the fiscal rules can become effective. They consist of a combination of an independent banking system, institutional investors, various forms or types and ways to contract debt, a friendly regulatory environment, capital limits for banks, and bankruptcy laws for when things go array. These items outline the enabling environment necessary for capital markets and, in particular municipal bond markets, to succeed in developing countries. Additional conditions are debatable but are often helpful to include national independent auditing offices, congressional oversite, and autonomous debt management offices. This article uses a path dependency approach to explain how Mexico created its bond market as a case study for the necessary conditions to strengthen the regulatory policy of subnational debt. |
