Institutional borrowing restrictions: evidence from Polish local governments
Institutional borrowing restrictions: evidence from Polish local governments

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Summary/Abstract: Municipal borrowing is a financial mechanism that enables local governments to pass tax burdens on to future generations. The theory of public finance argues that local government borrowing and spending may be more than optimal if the decisions of politicians are aimed at political gains. Therefore, the need for restrictions on borrowing by local governments is a generally accepted notion that is justified also by the fact that such restrictions are in force in the majority of decentralized countries. This paper is concerned with the debt level of Polish municipalities from 1990 to 2017. The main objective is to present past trends in the policies adopted in Poland concerning the mandatory limitations on municipal borrowing. Additionally, the author will try to assess the effectiveness of mandatory borrowing constraints and check whether current legislation takes into account the theoretical arguments of borrowing constraints.

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