Abstract
This study analyses the impact of fiscal decentralisation policy on economic development and poverty reduction. It focuses on the practice of intergovernmental fiscal transfer and on special autonomy policy in Aceh province, Indonesia, using data from 23 districts gathered from 2008 to 2018. Undertaking a panel data analysis, it will analyse the impact of intergovernmental fiscal transfer from central to local government on local government expenditure. The impact of local government expenditures and fiscal decentralisation practices on local gross domestic product (GDP) and poverty is also measured. The results show that several intergovernmental fiscal transfer policies in Aceh positively enhance the local expenditure. Further, the local government spending and fiscal decentralisation practices in Aceh improve the local GDP and reduce poverty levels in the region.
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