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Fiscal Adjustment in Transition Countries

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  • Catriona Purfield
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    Abstract

    In the 1990s, transition countries underwent large adjustments to address fiscal imbalances. This paper examines whether the factors identified in the literature on advanced economies, the size and composition of adjustment, are important in transition economies. It finds that larger consolidations were more successful in addressing fiscal imbalances on a durable basis. Policies focusing on expenditure reductions were more successful than those relying on revenue increases. There is little evidence of expansionary fiscal contractions, but fiscal contractions did not have a significantly negative impact on growth either. Few fiscal stimuli succeeded in boosting growth.

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    Bibliographic Info

    Paper provided by International Monetary Fund in its series IMF Working Papers with number 03/36.

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    Length: 22
    Date of creation: 01 Feb 2003
    Date of revision:
    Handle: RePEc:imf:imfwpa:03/36

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    Keywords: Transition economies; fiscal policy; expenditure; fiscal imbalances; fiscal adjustments; fiscal adjustment in transition; government expenditure; primary deficit; fiscal contraction; total expenditure; aggregate demand; fiscal adjustment episodes; tax increases; public expenditure; fiscal deficits; fiscal liabilities; fiscal consolidation; public external debt; tax reform; account deficits; public finances; public debt reverse; expenditure data; fiscal adjustment; fiscal contractions; expenditure cuts; fiscal stimulus; primary expenditure; public debt; expansionary fiscal; expansionary fiscal contractions; capital expenditure; expenditures; government deficit; expenditure increases; revenue collection; fiscal stimuli; government spending; budget deficits; fiscal position; fiscal issues; budget deficit; reduction in government spending; fiscal crises; public finance; budget constraint; fiscal transition; expenditure policies; fiscal stabilization; fiscal policy in transition; fiscal affairs; fiscal activities; fiscal austerity; fiscal expansions; tax cuts; interest expenditure; fiscal policies; fiscal adjustment efforts; fiscal affairs department; fiscal imbalance; spending cuts; quasi-fiscal activities;

    References

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    1. Francesco Giavazzi & Tullio Jappelli & Marco Pagano, 2000. "Searching for Non-Linear Effects of Fiscal Policy: Evidence from Industrial and Developing Countries," NBER Working Papers 7460, National Bureau of Economic Research, Inc.
    2. repec:fth:coluec:754 is not listed on IDEAS
    3. Bertola, G. & Drazen, A., 1991. "Trigger Pointsand Budget Cuts ; Explaining the Effects of Fiscal Austerity," Papers, Tel Aviv 26-91, Tel Aviv.
    4. Sutherland, Alan, 1995. "Fiscal Crises and Aggregate Demand: Can High Public Debt Reverse the Effects of Fiscal Policy?," CEPR Discussion Papers, C.E.P.R. Discussion Papers 1246, C.E.P.R. Discussion Papers.
    5. Jeffrey M. Davis & A. Cheasty, 1996. "Fiscal Transition in Countries of the Former Soviet Union," IMF Working Papers 96/61, International Monetary Fund.
    6. Kornai Janos, 1994. "Transformational Recession: The Main Causes," Journal of Comparative Economics, Elsevier, vol. 19(1), pages 39-63, August.
    7. Aleh Tsyvinski & Martin Petri & Günther Taube, 2002. "Energy Sector Quasi-Fiscal Activities in the Countries of the Former Soviet Union," IMF Working Papers 02/60, International Monetary Fund.
    8. Francesco Giavazzi & Marco Pagano, 1995. "Non-Keynesian Effects of Fiscal Policy Changes: International Evidence and the Swedish Experience," NBER Working Papers 5332, National Bureau of Economic Research, Inc.
    9. Robert F. Westcott & C. John McDermott, 1996. "An Empirical Analysis of Fiscal Adjustments," IMF Working Papers 96/59, International Monetary Fund.
    10. International Monetary Fund, 2001. "Transition Economies," IMF Working Papers 01/55, International Monetary Fund.
    11. Michael Gavin & Roberto Perotti, 1997. "Fiscal Policy in Latin America," NBER Chapters, National Bureau of Economic Research, Inc, in: NBER Macroeconomics Annual 1997, Volume 12, pages 11-72 National Bureau of Economic Research, Inc.
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    Cited by:
    1. Sanjeev Gupta & Alejandro Simone & Alex Segura-Ubiergo, 2006. "New Evidenceon Fiscal Adjustment and Growth in Transition Economies," IMF Working Papers 06/244, International Monetary Fund.
    2. Benedict J. Clements & Sanjeev Gupta & Emanuele Baldacci & Carlos Mulas-Granados, 2004. "Front-Loaded or Back-Loaded Fiscal Adjustments," IMF Working Papers 04/157, International Monetary Fund.
    3. Maria Neycheva, 2007. "Impact of Fiscal Policy on the Cumulative Production in the Bulgarian Economy," Economic Thought journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 3, pages 82-101.

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