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Fiscal crises

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  • Medas, Paulo
  • Poghosyan, Tigran
  • Xu, Yizhi
  • Farah-Yacoub, Juan
  • Gerling, Kerstin

Abstract

A key objective of fiscal policy is to maintain the sustainability of public finances and avoid crises. Remarkably, only a few studies provide empirical analysis on fiscal crises. This paper presents a new database of fiscal crises covering different country groups, including low-income developing countries (LIDCs) that have been mostly overlooked in the past. We also shed some light on policies and economic dynamics around crises. Surprisingly, advanced economies face greater turbulence, with half of them experiencing economic contractions during fiscal crises. Fiscal policy is usually procyclical around fiscal crises and the decline in economic growth is magnified if accompanied by a financial crisis.

Suggested Citation

  • Medas, Paulo & Poghosyan, Tigran & Xu, Yizhi & Farah-Yacoub, Juan & Gerling, Kerstin, 2018. "Fiscal crises," Journal of International Money and Finance, Elsevier, vol. 88(C), pages 191-207.
    • Handle: RePEc:eee:jimfin:v:88:y:2018:i:c:p:191-207
    DOI: 10.1016/j.jimonfin.2018.08.001
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    • Mrs. Kerstin Gerling & Mr. Paulo A Medas & Mr. Tigran Poghosyan & Juan Farah-Yacoub & Yizhi Xu, 2017. "Fiscal Crises," IMF Working Papers 2017/086, International Monetary Fund.

    References listed on IDEAS

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    2. Paul Beaudry & Tim Willems, 2022. "On the Macroeconomic Consequences of Over-Optimism," American Economic Journal: Macroeconomics, American Economic Association, vol. 14(1), pages 38-59, January.
    3. Rani Wijayanti & Sagita Rachmanira, 2020. "Early Warning System for Government Debt Crisis in Developing Countries," Journal of Central Banking Theory and Practice, Central bank of Montenegro, vol. 9(special i), pages 103-124.
    4. Eberhardt, Markus, 2018. "(At Least) Four Theories for Sovereign Default," CEPR Discussion Papers 13084, C.E.P.R. Discussion Papers.
    5. Mr. Markus Eberhardt & Mr. Andrea F Presbitero, 2018. "Commodity Price Movements and Banking Crises," IMF Working Papers 2018/153, International Monetary Fund.
    6. Ryota Nakatani, 2023. "Sovereign Debt Crisis and Fiscal Devolution," JRFM, MDPI, vol. 17(1), pages 1-8, December.
    7. Eberhardt, Markus & Presbitero, Andrea F., 2021. "Commodity prices and banking crises," Journal of International Economics, Elsevier, vol. 131(C).

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