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New Evidence on Fiscal Adjustment and Growth in Transition Economies

Author

Listed:
  • Alex Segura-Ubiergo

    (Fiscal Affairs Department, International Monetary Fund, 700 19th Street, N. W., Washington D.C., 20431, USA.)

  • Alejandro Simone

    (Fiscal Affairs Department, International Monetary Fund, 700 19th Street, N. W., Washington D.C., 20431, USA.)

  • Sanjeev Gupta

    (Fiscal Affairs Department, International Monetary Fund, 700 19th Street, N. W., Washington D.C., 20431, USA.)

  • Qiang Cui

    (Fiscal Affairs Department, International Monetary Fund, 700 19th Street, N. W., Washington D.C., 20431, USA.)

Abstract

This paper analyzes the relationship between fiscal adjustment and real GDP growth in a panel of 26 transition economies during 1992–2001. It finds a positive and statistically significant relationship between fiscal adjustment and real GDP growth that is robust to different model specifications and estimation methods when initial conditions, stabilization policies, and institutions are controlled for. Fiscal adjustment promotes growth in both the short and the long run in countries that have not yet attained macroeconomic stability. However, for countries that have achieved credible stabilization, additional fiscal adjustment is unlikely to yield large benefits in growth.

Suggested Citation

  • 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.
    • Handle: RePEc:pal:compes:v:52:y:2010:i:1:p:18-37
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    6. Moreno-Dodson, Blanca & Bayraktar, Nihal, 2011. "How Public Spending Can Help You Grow: An Empirical Analysis for Developing Countries," World Bank - Economic Premise, The World Bank, issue 48, pages 1-4, January.
    7. Ichiro Iwasaki & Kazuhiro Kumo, 2019. "J-Curve in Transition Economies: A Large Meta-analysis of the Determinants of Output Changes," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 61(1), pages 149-191, March.
    8. Paweł Borys & Piotr Ciżkowicz & Andrzej Rzońca, 2014. "Panel Data Evidence on the Effects of Fiscal Policy Shocks in the EU New Member States," Fiscal Studies, Institute for Fiscal Studies, vol. 35, pages 189-224, June.
    9. Nihal Bayraktar & Blanca Moreno-Dodson, 2015. "How Can Public Spending Help You Grow? An Empirical Analysis For Developing Countries," Bulletin of Economic Research, Wiley Blackwell, vol. 67(1), pages 30-64, January.
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