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Fiscal Adjustment in Transition Countries; Evidence From the 1990's

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  • Catriona Purfield

Abstract

In the 1990s, transition countries underwent large adjustments to address fiscal imbalances. This paper examines whether the factors identified in the literature on advanced economies, the size and composition of adjustment, are important in transition economies. It finds that larger consolidations were more successful in addressing fiscal imbalances on a durable basis. Policies focusing on expenditure reductions were more successful than those relying on revenue increases. There is little evidence of expansionary fiscal contractions, but fiscal contractions did not have a significantly negative impact on growth either. Few fiscal stimuli succeeded in boosting growth.

Suggested Citation

  • Catriona Purfield, 2003. "Fiscal Adjustment in Transition Countries; Evidence From the 1990's," IMF Working Papers 03/36, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:03/36
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    1. Jeffrey M. Davis & A. Cheasty, 1996. "Fiscal Transition in Countries of the Former Soviet Union; An Interim Assessment," IMF Working Papers 96/61, International Monetary Fund.
    2. Bertola, Giuseppe & Drazen, Allan, 1993. "Trigger Points and Budget Cuts: Explaining the Effects of Fiscal Austerity," American Economic Review, American Economic Association, vol. 83(1), pages 11-26, March.
    3. C. John McDermott & Robert F. Wescott, 1996. "An Empirical Analysis of Fiscal Adjustments," IMF Staff Papers, Palgrave Macmillan, vol. 43(4), pages 725-753, December.
    4. Francesco Giavazzi & Marco Pagano, 1995. "Non-Keynesian Effects of Fiscal Policy Changes: International Evidence and the Swedish Experience," NBER Working Papers 5332, National Bureau of Economic Research, Inc.
    5. Aleh Tsyvinski & Martin Petri & Günther Taube, 2002. "Energy Sector Quasi-Fiscal Activities in the Countries of the Former Soviet Union," IMF Working Papers 02/60, International Monetary Fund.
    6. Sutherland, Alan, 1997. "Fiscal crises and aggregate demand: can high public debt reverse the effects of fiscal policy?," Journal of Public Economics, Elsevier, vol. 65(2), pages 147-162, August.
    7. Giavazzi, Francesco & Jappelli, Tullio & Pagano, Marco, 2000. "Searching for non-linear effects of fiscal policy: Evidence from industrial and developing countries," European Economic Review, Elsevier, vol. 44(7), pages 1259-1289, June.
    8. Sanjeev Gupta & Luc Leruth & Luiz de Mello & Shamit Chakravarti, 2003. "Transition Economies: How Appropriate is the Size and Scope of Government?," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 45(4), pages 554-576, December.
    9. Michael Gavin & Roberto Perotti, 1997. "Fiscal Policy in Latin America," NBER Chapters,in: NBER Macroeconomics Annual 1997, Volume 12, pages 11-72 National Bureau of Economic Research, Inc.
    10. Kornai Janos, 1994. "Transformational Recession: The Main Causes," Journal of Comparative Economics, Elsevier, vol. 19(1), pages 39-63, August.
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    Cited by:

    1. Piotr Ciżkowicz & Andrzej Rzońca & Rafał Trzeciakowski, 2015. "Windfall of Low Interest Payments and Fiscal Sustainability in the Euro Area: Analysis through Panel Fiscal Reaction Functions," Kyklos, Wiley Blackwell, vol. 68(4), pages 475-510, November.
    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. repec:mes:emfitr:v:52:y:2016:i:8:p:1910-1921 is not listed on IDEAS
    4. Benedict J. Clements & Sanjeev Gupta & Emanuele Baldacci & Carlos Mulas-Granados, 2004. "Front-Loaded or Back-Loaded Fiscal Adjustments; What Works in Emerging Market Economies?," IMF Working Papers 04/157, International Monetary Fund.
    5. Iulian Viorel BRAȘOVEANU & Laura OBREJA BRAŞOVEANU, 2012. "Fiscal Policy In European Union Countries – A Comparative Analysis Of Adjustment And Expansions Fiscal Policy Episodes," Journal of Knowledge Management, Economics and Information Technology, ScientificPapers.org, vol. 2(3), pages 1-3, June.
    6. Maria Neycheva, 2007. "Impact of Fiscal Policy on the Cumulative Production in the Bulgarian Economy," Economic Thought journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 3, pages 82-101.

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