Fiscal fatigue, debt limits and fiscal space of mexican state governments

Abstract

In this paper, we explore the fiscal space of Mexican state governments: it evaluates the effects of decentralization on subnational public accounts and supports recommendations for fiscal sustainability for the states. Fiscal space is defined as a measure of the availability of resources that allows the adjustment of fiscal policy through financing or public spending. Through the operationalization of three variables, like primary balance, fiscal fatigue and debt limits, the fiscal space with which the states have faced their economic responsibilities during the 2003-2018 period is analyzed. The results show two situations: the first is that the fiscal space of the Mexican state governments is reduced or even required, that is, the data show narrowness in terms of the primary balance sheets, and the second is that, at the same time, these governments still have room for access to debt obligations.