A new IMF Working Paper and dataset identifies fiscal crises in 188 countries over the 1970 – 2015 period using four criteria including: credit events, exceptionally large official financing, implicit domestic public debt default, and loss of market confidence.



On the Ground

IMF Fiscal Monitor: Capitalizing on Good Times, April 2018

The April 2018 edition of Fiscal Monitor is focused on two broad themes: the burden of high global debt and the opportunities and challenges of digital government.

Fiscal Transparency Handbook

The 2018 Fiscal Transparency Handbook was published on April 21, 2018. The Handbook explains the principles and practices set out in the 2014 Fiscal Transparency Code, which was initially launched in the late 1990s and revised in 2014. The Code is the most widely recognized international standard for the disclosure of information about public finances.

Second-Generation Fiscal Rules : Balancing Simplicity, Flexibility, and Enforceability

Fiscal rule frameworks have evolved significantly in response to the global financial crisis. Many countries have reformed their fiscal rules or introduced new ones with a view to enhancing the credibility of fiscal policy and providing a medium-term anchor. Enforcement and monitoring mechanisms have also been upgraded. However, these innovations have made the systems of rules more complicated to operate, while compliance has not improved. The SDN takes stock of past experiences, reviews recent reforms, and presents new research on the effectiveness of rules. It also proposes guiding principles for future reforms to strike a better balance between simplicity, flexibility, and enforceability.

Problem-Solving Ideas

Thou Shalt Not Breach: The Impact on Sovereign Spreads of Noncomplying with the EU Fiscal Rules

There is evidence that fiscal rules, in particular well-designed rules, are associated with lower sovereign spreads. However, the impact of noncompliance with fiscal rules on spreads has not been examined in the literature.

Interest-Growth Differentials and Debt Limits in Advanced Economies

Do persistently low nominal interest rates mean that governments can safely borrow more? To addresses this question, I extend the model of Ghosh et al. [2013] to allow for persistent stochastic changes in nominal interest and growth rates.

When Do We Repair the Roof? Insights from Responses to Fiscal Crisis Early Warning Signals

Should policymakers wait for fiscal crisis early warning signals before repairing the roof? We give an answer to this question by investigating the interlinkages between early warning signals for fiscal crisis, policy responses, and policy outcomes, using a broad panel of 119 countries.

At A Cost: the Real Effects of Transfer Pricing Regulations

Unilateral adoption of transfer pricing regulations may have a negative impact on real investment by multinational corporations (MNCs). This paper uses a quasi-experimental research design, exploiting unique panel data on domestic and multinational companies in 27 countries during 2006-2014, to find that MNC affiliates reduce their investment by over 11 percent following the introduction of transfer pricing regulations.

Need to Know

Revenue Administration : Implementing a High-Wealth Individual Compliance Program

The note explains the rationale for a specialized compliance program for this segment of the taxpayer base and provides guidance on defining the population of wealthy individuals. Advice is also given on how to assess readiness for such a compliance program, taking into account the legal framework, the political environment, the availability of the necessary data and the administration’s capacity to implement it.

Understanding Revenue Administration: Results from the Second Survey of the Revenue Administration—Fiscal Information Tool

This paper presents the results of the second round of the Revenue Administration Fiscal Information Tool (RA-FIT) country survey in an aggregated manner for all respondents and by income group.

What People Are Saying

Bringing Down High Debt

Global debt hit a new record high of $164 trillion in 2016, the equivalent of 225 percent of global GDP. Both private and public debt have surged over the past decade. High debt makes government’s financing vulnerable to sudden changes in market sentiment. It also limits a government’s ability to provide support to the economy in the event of a downturn or a financial crisis.

Fiscal Rules: Make them Easy to Love and Hard to Cheat

Rules to contain lavish government deficits are most effective if countries design them to be simple, flexible, and enforceable in the face of changing economic circumstances. In new analysis, we look at fiscal rules in over 90 countries and, based on their experiences, find that the rules put in the place over the last three decades often were too complex, overly rigid, and difficult to enforce.

The Digital Gamble: New Technology Transforms Fiscal Policy

In Rwanda, digitally-monitored drones deliver blood supplies to hospitals. In Estonia, it takes five minutes to file taxes and 99 percent of government services are available online. Singapore was the first city to implement electronic road pricing to manage congestion. The world is becoming digital, and reliable, timely, and accurate information is available at the push of a button.

Game-Changers and Whistle-Blowers: Taxing Wealth

High and rising income inequality is a serious concern in many countries, as highlighted in the IMF’s recent Fiscal Monitor. Wealth, however, is distributed even more unequally than income, as in the picture below.

Books

Digital Revolutions in Public Finance

Digitization promises to reshape fiscal policy by transforming how governments collect, process, share, and act on information. More and higher-quality information can improve not only policy design for tax and spending, but also systems for their management, including tax administration and compliance, delivery of public services, administration of social programs, public financial management, and more. Countries must chart their own paths to effectively balance the potential benefits against the risks and challenges, including institutional and capacity constraints, privacy concerns, and new avenues for fraud and evasion.

Fiscal Politics

Two main themes of the book are that (1) politics can distort optimal fiscal policy through elections and through political fragmentation, and (2) rules and institutions can attenuate the negative effects of this dynamic. The book has three parts: part 1 (9 chapters) outlines the problems; part 2 (6 chapters) outlines how institutions and fiscal rules can offer solutions; and part 3 (4 chapters) discusses how multilevel governance frameworks can help.

Technical Assistance Reports

Cote d'Ivoire : Technical Assistance Report-Modernizing the Analysis, Monitoring, and Disclosure of Fiscal Risks
People’s Republic of China : Tax Policy and Employment Creation
Republic of Poland : Technical Assistance Report - Building Forward Estimates and Standardizing the Chart of Accounts