Fiscal Consolidation in Israel: A Global Fiscal Model Perspective
AbstractFiscal consolidation has become an important policy prescription for many emerging market countries (EMCs), particularly for the highly indebted ones. Although prudent fiscal policies tend to reduce vulnerabilities, their implementation is usually postponed. This paper represents, to the best of our knowledge, one of the first attempts in the literature to quantify the costs of delaying fiscal consolidation in an EMC. In particular, using the IMF's Global Fiscal Model (GFM), we find that early consolidation through expenditure cuts would result in a substantial increase in Israel's long-term output growth relative to the case with delayed fiscal adjustment. Using an alternative fiscal instrument, we find that delaying tax cuts would result in cumulative real GDP that is much larger than otherwise.
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Bibliographic InfoPaper provided by International Monetary Fund in its series IMF Working Papers with number 06/253.
Date of creation: 01 Nov 2006
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Other versions of this item:
- Selim Elekdag & Natan Epstein & Marialuz Moreno-BadÃa, 2007. "Fiscal Consolidation in Israel: A Global Fiscal Model Perspective," Emerging Markets Finance and Trade, M.E. Sharpe, Inc., vol. 43(6), pages 67-86, November.
- NEP-ALL-2006-11-25 (All new papers)
- NEP-MAC-2006-11-25 (Macroeconomics)
- NEP-PBE-2006-11-25 (Public Economics)
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