An Assessment of Cross-country Fiscal Consolidation
Carrasco, Bruno; Choi, Seung Mo | February 2006
Abstract
"This paper analyzes fiscal adjustment by reviewing the cross-country experience of the Organization for Economic Cooperation and Development (OECD) or mature economies, and the emerging market economies during 1970-2002. We find that initial conditions, composition, and timing of adjustment matter for successful fiscal adjustment (SFA). First, countries with higher primary deficits and larger government debts are more likely to pursue SFA. Second, in mature economies, SFA is driven by expenditure compression measures (largely cutbacks in subsidies) rather than by revenue augmentation measures. On the other hand, in emerging market economies, while expenditure compression measures (in particular, a decrease in capital expenditure) drive SFA, revenue augmentation measures also play an important role. Third, synchronizing fiscal adjustment to an expansionary phase of the business cycle increases the likelihood of its success. A probit analysis tends to support these findings. Finally, we review whether fiscal adjustment can indeed be expansionary. The findings point to a weak inclination toward noncontractionary outcomes, although further research is required to explain what drives this non-Keynesian result."
Citation
Carrasco, Bruno; Choi, Seung Mo. 2006. An Assessment of Cross-country Fiscal Consolidation. © Asian Development Bank. http://hdl.handle.net/11540/1873. License: CC BY 3.0 IGO.ISSN
1655-5252
Keywords
Urban Development Finance
Trade Finance
Small Business Finance
Rural Finance
Roundtable on International Trade and Finance
Regional Development Finance
Public Service Finance
Public Finance
Project Finance
Private Finance
Nonbank Financing
Non-Bank Financial Institutions
Municipal Finance
Local Government Finance
Local Currency Financing
Limited Resource Financing
International Financial Institutions
Infrastructure Financing
Industrial Finance
Government Financial Institutions
Government Finance
Financing of Infrastructure
Financial Sector Development
Financial Regulation
Public Sector Infrastructure
Public Sector Management
Public Sector Projects
Taxation
Public Accounting
National Budget
Municipal Bonds
Local Government
Local Taxes
International Monetary Relations
International Financial Market
International Banking
Central Banks
Business Financing
Capital Resources
Budgetary Policy
Capital Needs
Corporate Divestiture
Capital Instruments
Pension Funds
Insurance Companies
Banks
Portfolio Management
Fiscal Administration
Economics of Education
Development Banks
Public enterprises
Public finance
Infrastructure projects
Development projects
Grants
Loans
Use tax
Taxing power
State of taxation
Tax-sales
Tax revenue estimating
Tax planning
Spendings tax
Special assessments
Tax administration and procedure
Sales tax
Real property and taxation
Progressive taxation
Effect of taxation on land use
Effect of taxation on labor supply
Intergovernmental tax relations
Inheritance and transfer tax
Energy tax
Investment of public funds
Intergovernmental fiscal relations
Social infrastructure
Public works
Government lending
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