Spatial analysis of the effect of financial decentralization on economic stability, a study of Iranian provinces

In recent years, many fluctuations in key macroeconomic variables such as growth and inflation, etc. have been observed in Iran.Since the mentioned economic variables have a significant role in the situation of economic stability, so the study of the economic stability of the country have become one of the challenging issues. However, fiscal decentralization as a policy that may increase the country's economic stability has recently been considered by many countries. Therefore, The present study uses the space panel method to investigate the effects of fiscal decentralization on the economic stability of the country (a combined indicator of economic growth, inflation and budget deficit) during the years 2006-2016. The results of the study show a nonlinear relationship between fiscal decentralization and economic stability, they show that a 1% improvement in fiscal decentralization of income does reduce the Combined index of economic stability by 0.63%, however, with increasing fiscal decentralization of income, economic stability increases. The results also show that a 1% improvement in expenditure decentralization has led to a 1.4% increase in the economic stability index, while at high levels of fiscal decentralization of expenditure, the results indicate a decrease in economic stability.