Decentralized fiscal systems offer a greater potential for improved macroeconomic governance and regional fiscal equity than centralized fiscal systems .While empirical evidence on these questions is quite weak, nevertheless it further supports the conclusion that fiscal decentralization is associated with improved fiscal performance and better functioning of the internal common market. This is to be expected as decentralized fiscal systems require greater clarity in the roles of various players (centers of decision making), transparency in the rules and greater care in the design of institutions that govern interactions to ensure fair play and limit opportunities for rent seeking. Fiscal decentralization poses significant challenges for macroeconomic management. These challenges require careful design of monetary and fiscal institutions to overcome adverse incentives associated with the “common property” resource management problems or with rent seeking behaviors. Experiences of federal countries indicate significant learning and adaptation of fiscal systems to create incentives compatible with fair play and to overcome incomplete contracts. This explains why that decentralized fiscal systems appear to do better than centralized fiscal systems on most aspects of monetary and fiscal policy management and transparent and accountable governance.