Do middle-income countries continue to have the ability to deal with the global financial crisis ?
AbstractThis paper introduces an"index of macroeconomic space"-- demonstrating the ability of acountry to run a countercyclical fiscal policy or a fiscal stimulus at any point in time -- to show how a sample of 20 mostly middle-income countries had entered the 2008 global financial crisis with different initial conditions that, in turn, determined their ability to respond to this crisis. Since 2008, many have implemented expansionary fiscal policies and have used up available macroeconomic space. Most have had to resort to increased borrowing by the public sector, both externally and domestically. Can the middle-income countries restore their pre-2008 macroeconomic space (to the level given by historical averages of key macroeconomic variables) or contain it from further deterioration in the medium term? In an endeavor to address this question, this paper shows, through illustrative scenarios, that the room to maneuver for some countries is somewhat limited unless they embark on severe, unprecedented fiscal adjustments or they may need more time to do so than current projections seem to suggest.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by The World Bank in its series Policy Research Working Paper Series with number 5381.
Date of creation: 01 Jul 2010
Date of revision:
Debt Markets; Emerging Markets; External Debt; Economic Theory&Research; Bankruptcy and Resolution of Financial Distress;
This paper has been announced in the following NEP Reports:
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.:
- Carmen M. Reinhart & Kenneth S. Rogoff, 2011.
"From Financial Crash to Debt Crisis,"
American Economic Review, American Economic Association,
American Economic Association, vol. 101(5), pages 1676-1706, August.
- Petia Topalova & Dan Nyberg, 2010. "What Level of Public Debt Could India Target?," IMF Working Papers 10/7, International Monetary Fund.
- Sudarshan Gooptu & Carlos A. Primo Braga, 2010. "Debt Management : Now the Difficult Part," World Bank Other Operational Studies 10169, The World Bank.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Roula I. Yazigi).
If references are entirely missing, you can add them using this form.