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Fiscal Consolidation and Public Debt

Author

Listed:
  • Ando, Sakai
  • Mishra, Prachi
  • Patel, Nikhil
  • Peralta-Alva, Adrian
  • Presbitero, Andrea

Abstract

High public debt is urging policy makers to consider strategies to rebuild buffers and preserve debt sustainability. Using a large sample of advanced and emerging countries, we focus on fiscal consolidation, and evaluate whether—and under which conditions—fiscal consolidation is likely to be associated with a durable reduction in public debt to GDP ratios. Our findings indicate that, on average, fiscal consolidation has a minimal impact on debt ratios. However, consolidations implemented during economic upturns and in environments with high potential for crowding out effects are more likely to be associated with sustained reductions in debt ratios.

Suggested Citation

  • Ando, Sakai & Mishra, Prachi & Patel, Nikhil & Peralta-Alva, Adrian & Presbitero, Andrea, 2023. "Fiscal Consolidation and Public Debt," CEPR Discussion Papers 18548, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:18548
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    More about this item

    Keywords

    Public debt; Fiscal consolidation;

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
    • H68 - Public Economics - - National Budget, Deficit, and Debt - - - Forecasts of Budgets, Deficits, and Debt

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