Abstract
Tied (or conditional) grants are typically a key elements of most intergovernmental fiscal transfer systems. They are an effective tool for central adn upper level governments to pursue a variety of objectives but in order to understand how they work, tied grants need to be seen as part of the whole system of intergovernmental fiscal relations operating in a nation. This paper discusses many aspects of the design and management of tied grants, and concludes that they need far more careful consideration than is often given to them. Before discussing specific issues relating to tied grants, however, we think it will be useful to clarify some terminology and review the place and role of tied grants in the overall context of intergovernmental fiscal relations.
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