An Empirical Analysis of Fiscal Adjustments

Author/Editor:

Robert F. Westcott ; C. John McDermott

Publication Date:

June 1, 1996

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

This study uses the fiscal expansion and consolidation experiences of the industrial countries over the period 1970 to 1995 to examine the interplay between fiscal adjustments and economic performance. A key finding is that fiscal consolidation need not trigger an economic slowdown. Fiscal consolidation that concentrates on the expenditure side, and especially on transfers and government wages, is more likely to succeed in reducing the public debt ratio than tax-based consolidation. Also, the greater the magnitude of the fiscal consolidation, the more likely it is to succeed in reducing the debt ratio.

Series:

Working Paper No. 1996/059

Subject:

Expenditure Fiscal consolidation Fiscal policy Fiscal stance Fiscal stimulus Public debt

English

Publication Date:

June 1, 1996

ISBN/ISSN:

9781451965957/1018-5941

Stock No:

WPIEA0591996

Pages:

26

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