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The Budgetary Control and Fiscal Impact of Government Contingent Liabilities


  • Christopher M. Towe

    (International Monetary Fund)


Conventional fiscal accounting methodologies do not appropriately account for governments' noncash policies, such as their contingent liabilities. When these liabilities are called, budget costs can be large, as evidenced by the U.S. savings and loan crisis. In general, deficit measures may underestimate the macroeconomic impact of government policies, promoting the substitution of noncash for cash expenditure and increasing future financing requirements. This paper describes extended deficit measures to address the problem, but notes their limited practical value. Nonetheless, some alternative methods of valuing contingent liabilities are proposed to gauge fiscal impact and facilitate budgetary control.

Suggested Citation

  • Christopher M. Towe, 1991. "The Budgetary Control and Fiscal Impact of Government Contingent Liabilities," IMF Staff Papers, Palgrave Macmillan, vol. 38(1), pages 109-134, March.
  • Handle: RePEc:pal:imfstp:v:38:y:1991:i:1:p:109-134

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    References listed on IDEAS

    1. Bischoff, Charles W, 1969. "Hypothesis Testing and the Demand for Capital Goods," The Review of Economics and Statistics, MIT Press, vol. 51(3), pages 354-368, August.
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    Cited by:

    1. Robert Holzmann & Yves Hervé & Roland Demmel, 1996. "The maastricht fiscal criteria: Required but ineffective?," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 23(1), pages 25-58, February.
    2. Elva Bova & Marta Ruiz-Arranz & Frederik G Toscani & H. Elif Ture, 2016. "The Fiscal Costs of Contingent Liabilities; A New Dataset," IMF Working Papers 16/14, International Monetary Fund.
    3. Klein, Michael, 1997. "Managing guarantee programs in support of infrastructure investment," Policy Research Working Paper Series 1812, The World Bank.
    4. Fabrizio Balassone & Daniele Franco & Stefania Zotteri, 2006. "EMU fiscal indicators: a misleading compass?," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 33(2), pages 63-87, June.
    5. World Bank, 2001. "Mexico - Fiscal Sustainability (Vol. 1 of 2) : Executive Summary," World Bank Other Operational Studies 15503, The World Bank.

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