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New Evidence on Fiscal Adjustment and Growth in Transition Economies

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  • Alex Segura-Ubiergo

    ()
    (Fiscal Affairs Department, International Monetary Fund, 700 19th Street, N. W., Washington D.C., 20431, USA.)

  • Alejandro Simone

    ()
    (Fiscal Affairs Department, International Monetary Fund, 700 19th Street, N. W., Washington D.C., 20431, USA.)

  • Sanjeev Gupta

    ()
    (Fiscal Affairs Department, International Monetary Fund, 700 19th Street, N. W., Washington D.C., 20431, USA.)

  • Qiang Cui

    ()
    (Fiscal Affairs Department, International Monetary Fund, 700 19th Street, N. W., Washington D.C., 20431, USA.)

Abstract

This paper analyzes the relationship between fiscal adjustment and real GDP growth in a panel of 26 transition economies during 1992–2001. It finds a positive and statistically significant relationship between fiscal adjustment and real GDP growth that is robust to different model specifications and estimation methods when initial conditions, stabilization policies, and institutions are controlled for. Fiscal adjustment promotes growth in both the short and the long run in countries that have not yet attained macroeconomic stability. However, for countries that have achieved credible stabilization, additional fiscal adjustment is unlikely to yield large benefits in growth.

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Bibliographic Info

Article provided by Palgrave Macmillan in its journal Comparative Economic Studies.

Volume (Year): 52 (2010)
Issue (Month): 1 (March)
Pages: 18-37

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Handle: RePEc:pal:compes:v:52:y:2010:i:1:p:18-37

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Cited by:
  1. Borys, Paweł & Ciżkowicz, Piotr & Rzońca, Andrzej, 2013. "Panel data evidence on effects of fiscal impulses in the EU New Member States," MPRA Paper 48243, University Library of Munich, Germany.
  2. Paweł Borys & Piotr Ciżkowicz & Andrzej Rzońca, 2013. "Panel data evidence on the effects of fiscal impulses in the EU New Member States," National Bank of Poland Working Papers, National Bank of Poland, Economic Institute 161, National Bank of Poland, Economic Institute.
  3. Brownbridge, Martin & Canagarajah, Sudharshan, 2008. "Fiscal policy for growth and development in Tajikistan," Policy Research Working Paper Series, The World Bank 4532, The World Bank.
  4. Moreno-Dodson, Blanca & Bayraktar, Nihal, 2011. "How Public Spending Can Help You Grow: An Empirical Analysis for Developing Countries," World Bank - Economic Premise, The World Bank, The World Bank, issue 48, pages 1-4, January.
  5. Bayraktar, Nihal & Moreno-Dodson, Blanca, 2010. "How can public spending help you grow? an empirical analysis for developing countries," Policy Research Working Paper Series, The World Bank 5367, The World Bank.
  6. Blanca Moreno-Dodson & Nihal Bayraktar, 2011. "How Public Spending Can Help You Grow : An Empirical Analysis for Developing Countries," World Bank Other Operational Studies 10107, The World Bank.
  7. Teresa Ter-Minassian & Richard Hughes & Alejandro Hajdenberg, 2008. "Creating Sustainable Fiscal Space for Infrastructure," IMF Working Papers, International Monetary Fund 08/256, International Monetary Fund.
  8. Borys, Paweł & Ciżkowicz, Piotr & Rzońca, Andrzej, 2011. "Panel data evidence on non-Keynesian efects of fiscal policy in the EU New Member," MPRA Paper 32696, University Library of Munich, Germany.
  9. Laura Obreja Braşoveanu, 2012. "Correlation Between Government and Economic Growth - Specific Features for 10 Nms," Journal of Knowledge Management, Economics and Information Technology, ScientificPapers.org, ScientificPapers.org, vol. 2(5), pages 14, October.
  10. World Bank, 2011. "Republic of Tajikistan - Country Economic Memorandum : Tajikistan’s Quest for Growth: Stimulating Private Investment," World Bank Other Operational Studies 2761, The World Bank.

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