Pressure or Prudence? Tales of Market Pressure and Fiscal Adjustment

Author/Editor: Salvatore Dell'Erba ; Todd D. Mattina ; Agustin Roitman
Publication Date: July 17, 2013
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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: We study whether multiyear fiscal adjustment plans in 17 OECD countries during 1980-2011 have been associated with market pressure. We find that only a third (34 percent) of the consolidations occurred under market pressure, suggesting that market pressure is important but not the main element associated with consolidation plans. Many adjustments under market pressure were also clustered around external shocks, and entailed larger median fiscal adjustments than other multiyear consolidations. In contrast, we find that virtually all multiyear consolidations aimed at reducing budget deficits occurred with initially weak macro-fiscal fundamentals.
Series: Working Paper No. 13/170
Subject(s): Fiscal consolidation | OECD | Fiscal policy | Cross country analysis | Economic models

Publication Date: July 17, 2013
ISBN/ISSN: 9781484374054/1018-5941 Format: Paper
Stock No: WPIEA2013170 Pages: 40
US$18.00 (Academic Rate:
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