Abstract:

The Czechia applies a combined model of fiscal federalism with relatively low fiscal decentralisation and belongs to countries with the most territorial fragmentation of municipalities. The aim of the article is to examine relationship between fiscal decentralisation and economic development in the Czechia in the years 2000-2019. There are used following indicators: expenditure decentralisation, revenue decentralisation, intergovernmental transfer decentralisation and tax revenue decentralisation. The empirical tests are based on cross correlation and Granger causality methodology. The results suggest that decentralisation appears to be positively associated with GDP per capita but negatively associated with real GDP growth, except expenditure decentralisation positively correlated in both cases. The relationship is stronger for economic maturity than for economic growth and GDP growth comes first followed by decentralisation.