Local governments in the US and fiscal health

What is it about?

This article explores the relationship between local economic development and local government fiscal health, emphasizing the critical role of fiscal policy in determining long-term success. Using data from 2017 to 2022 for all counties in North Carolina, we apply Granger causality analysis to examine the relationship between a county’s economic growth and its fiscal condition. Our findings show that fiscal health significantly influences local economic growth, indicating a unidirectional causality where better fiscal health can facilitate economic development. These observations add much-needed empirical evidence to the continuing literature on the importance of economic growth and the related fiscal policy choices.

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