The Nexus Among Fiscal Policies, Fiscal Decentralization, and Economic Performance: Joint Effect of Globalization and Institutional Quality

This article aims to reveal not only the individual effects of globalization and institutional quality but also their interaction effects on fiscal decentralization, government spending, tax revenues, and economic performance. The role of institutions is important as the underlying basis for economic activity. Institutional quality should include an analysis of the impact of fiscal decentralization on macroeconomic variables to determine the dynamics of economic structure. There are not enough studies that deal with the interaction effect of globalization and institutional quality within this concept. As an additional contribution, panel VARX method is applied to investigate the direction and size of the interaction for the 24 countries that are members of Organization for Economic Cooperation and Development between 1996 and 2010.