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What sustains fiscal consolidations in emerging market countries?


  • Sanjeev Gupta

    (International Monetary Fund, USA)

  • Emanuele Baldacci

    (International Monetary Fund, USA)

  • Benedict Clements

    (International Monetary Fund, USA)

  • Erwin R. Tiongson

    (International Monetary Fund, USA)


This paper examines the factors affecting the persistence of fiscal consolidation in 25 emerging market countries during 1980-2001. It proposes a new approach for defining spells of fiscal consolidation. The results indicate that the probability of ending a fiscal adjustment is affected by the legacy of previous fiscal failures, the size of the deficit, the composition of spending and level of total revenues. There is also some evidence that the initial debt stock, exchange rate developments, inflation and the unemployment rate have an impact on the persistence of adjustments. Copyright © 2005 John Wiley & Sons, Ltd.

Suggested Citation

  • Sanjeev Gupta & Emanuele Baldacci & Benedict Clements & Erwin R. Tiongson, 2005. "What sustains fiscal consolidations in emerging market countries?," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 10(4), pages 307-321.
  • Handle: RePEc:ijf:ijfiec:v:10:y:2005:i:4:p:307-321 DOI: 10.1002/ijfe.274

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    References listed on IDEAS

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    9. Perotti, Roberto, 1998. " The Political Economy of Fiscal Consolidations," Scandinavian Journal of Economics, Wiley Blackwell, vol. 100(1), pages 367-394, March.
    10. Alesina, Alberto Francesco & Perotti, Roberto & Tavares, Jose, 1998. "The Political Economy of Fiscal Adjustments," Scholarly Articles 12553724, Harvard University Department of Economics.
    11. Heylen, Freddy & Everaert, Gerdie, 2000. "Success and Failure of Fiscal Consolidation in the OECD: A Multivariate Analysis," Public Choice, Springer, vol. 105(1-2), pages 103-124, October.
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    15. Sanjeev Gupta & Benedict Clements & Emanuele Baldacci & Carlos Mulas-Granados, 2004. "The persistence of fiscal adjustments in developing countries," Applied Economics Letters, Taylor & Francis Journals, vol. 11(4), pages 209-212.
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    19. Ali Bayar, 2001. "Entry and exit dynamics of excessive deficits in the European Union," ULB Institutional Repository 2013/13494, ULB -- Universite Libre de Bruxelles.
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    Cited by:

    1. Christoph A. Schaltegger & Martin Weder, 2015. "Fiscal Adjustments and the Probability of Sovereign Default," Kyklos, Wiley Blackwell, vol. 68(1), pages 81-110, February.
    2. Alex Segura-Ubiergo & Alejandro Simone & Sanjeev Gupta & Qiang Cui, 2010. "New Evidence on Fiscal Adjustment and Growth in Transition Economies," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 52(1), pages 18-37, March.
    3. Gnangnon, Sèna Kimm, 2014. "The Effect of Development Aid Unpredictability and Migrants’ Remittances on Fiscal Consolidation in Developing Countries," World Development, Elsevier, vol. 54(C), pages 168-190.
    4. International Monetary Fund, 2014. "South Africa; Selected Issues," IMF Staff Country Reports 14/339, International Monetary Fund.
    5. Sanjeev Gupta & Carlos Mulas-Granados & Emanuele Baldacci, 2009. "How Effective is Fiscal Policy Response in Systemic Banking Crises?," IMF Working Papers 09/160, International Monetary Fund.
    6. Sanjeev Gupta & Amine Mati & Emanuele Baldacci, 2008. "Is it (Still) Mostly Fiscal? Determinants of Sovereign Spreads in Emerging Markets," IMF Working Papers 08/259, International Monetary Fund.
    7. repec:kap:pubcho:v:171:y:2017:i:3:d:10.1007_s11127-017-0441-0 is not listed on IDEAS
    8. Mati, Amine & Thornton, John, 2008. "The exchange rate and fiscal consolidation episodes in emerging market economies," Economics Letters, Elsevier, vol. 100(1), pages 115-118, July.

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