Financial Vulnerability

This chapter provides a review of the relevant theoretical concepts, namely the concept of financial vulnerability and its relationship to external institutional design, to internal issues of financial vulnerability, and to the perception of the capacity to cope with a crisis such as the COVID-19 pandemic. Based on this literature overview, a framework is developed to understand what factors contributed to financial vulnerability in local governments (LGs) and the consequent impact in the immediate aftermath of this global pandemic crisis. This conceptual framework will be applied to eight countries to appreciate the impact of the pandemic on local finances, exploring individual conditions that affected financial vulnerability across LGs.