Fiscal stabilization, debt sustainability, and public spending in subnational governments: the case of the Spanish regions

This paper focusses on the objectives guiding the fiscal policy of the Spanish regions over the period 2013-2023. Beyond the usual concerns of national governments for closing the output gap and guaranteeing debt sustainability, we have included an additional task at the subnational level, namely, the provision of public services such as health and education. The results indicate that, except for the year 2020, there is a strong policy preference for primary public spending, with a relative weight of between 40 and 60 per cent among the objectives driving fiscal policy. The preference for debt sustainability has ranged between 20 per cent (with the maximum value reached in 2013 and then again after the pandemic) and 0, depending on the model specification. And finally, the weight of stabilization has been estimated, using previous contributions, at between 0.39 and 0.25. Additional results regarding variations across regions have been also obtained.