How to enhance the fiscal performance of municipalities: A nonlinear examination of Turkish metropolitan municipality experience

We investigate the effects of metropolitan municipal expenditure and revenue on fiscal performance using linear and nonlinear panel data analyses. The empirical results of the nonlinear analysis, which constitutes the original value of our study, indicate that the deterioration in fiscal performance due to investment expenditures is lower when the current budget balance exceeds the estimated threshold level. However, the effect of municipal own-source revenue on budget balances differs in terms of the level of dependency on the central government. The fiscal policy reflections of our findings underline the importance of optimizing expenditure and savings levels and reducing dependency on the central government to enhance the fiscal performance of metropolitan municipalities.