MULTI-INDICATOR SYSTEM FOR ASSESSING THE FINANCIAL INDEPENDENCE OF LOCAL BUDGETS AND THE METHODOLOGY FOR FORMING AN INTEGRAL INDEX
DOI:
https://doi.org/10.5281/zenodo.18859133Keywords:
local budgets, financial independence, fiscal decentralization, revenue autonomy, transfer dependency, vertical fiscal imbalance, tax autonomy, expenditure autonomy, fiscal effort, composite index, FMI, budget sustainability, regional finance, normative thresholds, assessment methodologyAbstract
This article develops a multi-indicator framework for assessing the financial independence of local budgets
and proposes a methodology for constructing an integral Financial Independence Index (FMI). The study systematically
analyzes key indicators, including revenue autonomy, transfer dependency, vertical fiscal imbalance, tax autonomy,
expenditure autonomy, fiscal effort, and own-revenue stability. The economic substance, calculation formulas, and
normative threshold values of each indicator are substantiated.
Furthermore, a methodological approach to aggregating these indicators into a unified composite index through
normalization and weighting procedures is proposed. Various weighting techniques, such as the Analytic Hierarchy Process
(AHP), the entropy method, and regression-based approaches, are examined. The proposed methodology provides a
comprehensive tool for evaluating the financial independence of local budgets, enabling interregional comparisons and
assessing the effectiveness of fiscal decentralization policies
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