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What Sustains Fiscal Consolidations in Emerging Market Countries?

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Author Info
Emanuele Baldacci
Benedict J. Clements
Sanjeev Gupta
Erwin Tiongson
Abstract

This paper examines the factors affecting the persistence of fiscal consolidation in 25 emerging market countries during 1980-2001. It proposes a new approach for defining spells of fiscal consolidation. The results indicate that the probability of ending a fiscal adjustment is affected by the legacy of previous fiscal failures, the size of the deficit, the composition of spending, and level of total revenues. There is also some evidence that the initial debt stock, exchange rate developments, inflation, and the unemployment rate have an impact on the persistence of adjustments.

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Paper provided by International Monetary Fund in its series IMF Working Papers with number 03/224.

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Length: 26 pages
Date of creation: 05 Dec 2003
Date of revision:
Handle: RePEc:imf:imfwpa:03/224

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Related research
Keywords: Fiscal reforms ; Fiscal policy ; Emerging markets ; Structural adjustment ;

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Hjelm, Goran, 2002. " Effects of Fiscal Contractions: The Importance of Preceding Exchange Rate Movements," Scandinavian Journal of Economics, Blackwell Publishing, vol. 104(3), pages 423-41, September. [Downloadable!] (restricted)
  2. Perotti, Roberto, 1996. "Fiscal Consolidation in Europe: Composition Matters," American Economic Review, American Economic Association, vol. 86(2), pages 105-10, May. [Downloadable!] (restricted)
  3. Ardagna, Silvia, 2001. " Fiscal Policy Composition, Public Debt, and Economic Activity," Public Choice, Springer, vol. 109(3-4), pages 301-25, December. [Downloadable!] (restricted)
  4. von Hagen, Jurgen & Hughes Hallett, Andrew & Strauch, Rolf, 2002. "Budgetary Consolidation in Europe: Quality, Economic Conditions, and Persistence," Journal of the Japanese and International Economies, Elsevier, vol. 16(4), pages 512-535, December. [Downloadable!] (restricted)
  5. Vito Tanzi & Howell H. Zee, 1996. "Fiscal Policy and Long-Run Growth," IMF Working Papers 96/119, International Monetary Fund.
  6. Soojin Moon & Aleš Bulir, 2003. "Do IMF-Supported Programs Help Make Fiscal Adjustment More Durable?," IMF Working Papers 03/38, International Monetary Fund. [Downloadable!]
  7. Heylen, Freddy & Everaert, Gerdie, 2000. " Success and Failure of Fiscal Consolidation in the OECD: A Multivariate Analysis," Public Choice, Springer, vol. 105(1-2), pages 103-24, October. [Downloadable!] (restricted)
  8. Baldacci, Emanuele & Hillman, Arye L. & Kojo, Naoko C., 2004. "Growth, governance, and fiscal policy transmission channels in low-income countries," European Journal of Political Economy, Elsevier, vol. 20(3), pages 517-549, September. [Downloadable!] (restricted)
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  9. Stanley Fischer, 1993. "The Role of Macroeconomic Factors in Growth," NBER Working Papers 4565, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  10. Giavazzi, Francesco & Jappelli, Tullio & Pagano, Marco, 2000. "Searching for Non-Linear Effects of Fiscal Policy: Evidence from Industrial and Developing Countries," CEPR Discussion Papers 2374, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  11. Reyes Maroto Illera & Carlos Mulas-Granados, . "Duration of Fiscal Consolidations in the European Union," Working Papers 2001-19, FEDEA. [Downloadable!]
  12. A.J. Hughes Hallett & Peter McAdam, 2003. "Deficit Targeting Strategies: Fiscal Consolidation and the Probability Distribution of Deficits under the Stability Pact," Journal of Common Market Studies, Blackwell Publishing, vol. 41(3), pages 421-444, 06. [Downloadable!] (restricted)
  13. Roberto Perotti, 1999. "Fiscal Policy In Good Times And Bad," The Quarterly Journal of Economics, MIT Press, vol. 114(4), pages 1399-1436, November. [Downloadable!] (restricted)
  14. C. John McDermott & Robert F. Westcott, 1996. "An Empirical Analysis of Fiscal Adjustments," IMF Working Papers 96/59, International Monetary Fund.
  15. Lambertini, Luisa & Tavares, Jose, 2002. "Exchange Rates and Fiscal Adjustments: Evidence from the OECD and Implications for EMU," FEUNL Working Paper Series wp412, Universidade Nova de Lisboa, Faculdade de Economia. [Downloadable!]
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  16. Alberto Alesina & Silvia Ardagna, 1998. "Tales of fiscal adjustment," Economic Policy, CEPR, CES, MSH, vol. 13(27), pages 487-545, October. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Robert Lavigne, 2006. "The Institutional and Political Determinants of Fiscal Adjustment," Working Papers 06-1, Bank of Canada. [Downloadable!]
  2. Murtaza H. Syed & Michael Skaarup & Tarhan Feyzioglu, 2008. "Addressing Korea's Long-Term Fiscal Challenges," IMF Working Papers 08/27, International Monetary Fund. [Downloadable!]
  3. Carlos Mulas-Granados & Emanuele Baldacci & Benedict J. Clements & Sanjeev Gupta, 2004. "Front-Loaded or Back-Loaded Fiscal Adjustments: What Works in Emerging Market Economies?," IMF Working Papers 04/157, International Monetary Fund. [Downloadable!]
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