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Front-Loaded or Back-Loaded Fiscal Adjustments: What Works in Emerging Market Economies?

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  • Mr. Benedict J. Clements
  • Mr. Sanjeev Gupta
  • Mr. Emanuele Baldacci
  • Mr. Carlos Mulas-Granados

Abstract

This paper investigates the political and economic determinants of successful fiscal adjustment in 25 emerging market economies from 1980 to 2001. The results show that large and back-loaded fiscal adjustments have the highest likelihood of success. Fiscal consolidations based on expenditure cuts increase the probability of approaching and achieving fiscal sustainability but are insufficient to maintain it unless accompanied by revenue reforms. Adjustment episodes launched in countries where governments enjoy a parliamentary majority and do not face imminent elections, are found to be more successful. Fiscal consolidations undertaken under IMF-supported programs also have a higher probability of success.

Suggested Citation

  • Mr. Benedict J. Clements & Mr. Sanjeev Gupta & Mr. Emanuele Baldacci & Mr. Carlos Mulas-Granados, 2004. "Front-Loaded or Back-Loaded Fiscal Adjustments: What Works in Emerging Market Economies?," IMF Working Papers 2004/157, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2004/157
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    References listed on IDEAS

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    2. Wiese, Rasmus & Jong-A-Pin, Richard & de Haan, Jakob, 2018. "Can successful fiscal adjustments only be achieved by spending cuts?," European Journal of Political Economy, Elsevier, vol. 54(C), pages 145-166.
    3. Robert Lavigne, 2006. "The Institutional and Political Determinants of Fiscal Adjustment," Staff Working Papers 06-1, Bank of Canada.
    4. Lavigne, Robert, 2011. "The political and institutional determinants of fiscal adjustment: Entering and exiting fiscal distress," European Journal of Political Economy, Elsevier, vol. 27(1), pages 17-35, March.
    5. Salih BARIŞIK & Abdullah BARIS, 2017. "Impact of governance on budget deficit in developing countries," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(2(611), S), pages 111-130, Summer.
    6. Tobignaré Yabré & Gervasio Semedo, 2021. "Political stability and fiscal consolidation in sub‐Saharan African countries," The World Economy, Wiley Blackwell, vol. 44(4), pages 1077-1109, April.
    7. Mr. Taimur Baig & Mr. Abdul d Abiad, 2005. "Underlying Factors Driving Fiscal Effort in Emerging Market Economies," IMF Working Papers 2005/106, International Monetary Fund.
    8. Tassos Giannitsis & Stavros Zografakis, 2018. "Crisis management in Greece," IMK Studies 58-2018, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    9. Ms. Ratna Sahay & Rishi Goyal, 2006. "Volatility and Growth in Latin America: An Episodic Approach," IMF Working Papers 2006/287, International Monetary Fund.

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