## Fiscal Policy Analysis (FPA)

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**Canonical URL:** [Fiscal Policy Analysis (FPA)](https://www.imf.org/-/media/files/icd/fpa.pdf)

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### Course objectives and learning objectives
- Aim: Provide an overview of key fiscal policy concepts and techniques to analyze how fiscal policy can help ensure macroeconomic stability and sustainable long-term growth.
- Format: Hands-on course built around core macro-fiscal topics, substantiated by general empirical findings, excel-based workshops, case studies, and selected topics of regional interest.
- Target competence:
  - Discuss the role of fiscal policy in attaining the key objectives of the government: macro-stability, equity and efficiency, and sustainable long -term growth.
  - Use the tools and techniques to assess the fiscal stance, fiscal multipliers and debt sustainability.
  - Review the key elements of tax and expenditure policy: concepts and best practices.

### Course overview and main thematic units
- Fiscal policy formulation is influenced by the macroeconomic context and influences macroeconomic outcomes.
- The course sequence: expenditure and tax policy → macro-fiscal policy topics (measuring fiscal stance, fiscal multipliers, fiscal projections, debt sustainability) → participant thematic presentations.

Major units:
- Unit 1. Recent macro trends, fiscal challenges and overview of the course.
- Unit 2. Public finance and the macroeconomy: government role and objectives (macroeconomic stability, efficient and equitable resource allocation, sustainable long-term growth).
- Unit 3 & Unit 4. Expenditure policy and domestic resource mobilization: level and composition of expenditure and revenue.
- Unit 5. Fiscal policy and inclusive growth: investment in physical and human capital, and equity.
- Unit 6. Fiscal accounts, fiscal aggregates, and other economic variables: key concepts, interrelations, and importance for fiscal objectives.
- Unit 7. Fiscal projections: anchor for medium-term fiscal policy objectives.
- Unit 8. Fiscal sustainability, debt tolerance, and fiscal space: standard techniques to study debt dynamics and preserve debt sustainability.
- Unit 9. Fiscal multipliers: measurement of fiscal policy impact and determinants of multiplier size.
- Unit 10. Measuring the fiscal stance: cyclical adjustment, countercyclical policies, output gap, cyclically-adjusted and structural balances.

Non-core units (selected):
- NC Unit 1. Fiscal policy for the crisis and post-crisis period (2008-09 crisis context).
- NC Unit 2. Fiscal frameworks in resource-rich countries (high income volatility and intergenerational transfers).
- NC Unit 3. Expenditure subsidy reform (subsidies, reform design).
- NC Unit 4. Dealing with volatility (LICs and EMs face high income volatility, more frequent fiscal crashes and sudden stops).
- NC Unit 5. Expenditure Policy: Investment spending (designing investment spending plans and challenges).

### Target audience and prerequisites
- Target: (junior to senior) officials interested in analysis of fiscal policy and macroeconomic implications (e.g., macro-fiscal unit and forecasting units).
- Prerequisites:
  - Undergraduate courses in macroeconomics or equivalent experience.
  - Basic background in microeconomics and econometrics.
  - Comfortable using econometric software such as EViews.

### Performance evaluation and synergies
- Performance evaluation: Two multiple-choice tests will be given, one at the beginning and one at the end of the course.
- Synergies with TA: Provides general context on fiscal policy and is a first step to training/technical assistance for officials in macrofiscal or other policy units in ministries of finance and central banks.

### Program structure and schedule (daily breakdown with durations)
- Day 1
  - Briefings: 1.5 hours (Administrative briefing; Opening session; Quiz)
  - Unit 1: 1.5 hours (L–1 Recent macro trends, fiscal challenges and overview)
    - Objectives: Discuss recent global and regional macro trends; Identify main fiscal challenges; Provide a course roadmap
  - Unit 2: 3 hours (L–2 Public finance and the macroeconomy)
    - Topics: public goods, externalities, asymmetric information; fiscal policy and long-term growth and equity; fiscal policy and macro stability; interaction between monetary and fiscal policy
  - Discussion: 1.5 hours (O–1 Discussion of fiscal challenges in participants’ countries)

- Day 2
  - Unit 3: 3 hours (L–3 Expenditure Policy)
    - Topics: Types of expenditure; Expenditure rationalization; Long-term expenditure issues (for LIC and EM)
  - W–1 Expenditure Policy Workshop (case study)
    - Tasks: Assessment of government employment and wages; Options for public employment rationalization; Structural measures for higher public spending efficiency
  - Unit 4: 3 hours (L–4 Domestic Resource Mobilization)
    - Topics: General principles; Recent trends and policy issues; Tax policy reforms; Revenue administration; VAT reforms

- Day 3
  - Unit 4 workshop: 1.5 hours (W–2 Workshop: Tax Policy Reform (case study))
    - Tasks: Assessment of the tax system (structure and tax effort); Tax system reform package: direct and indirect taxes; Reform of special regimes and tax incentives
  - Unit 5: 1.5 hours (L–5 Fiscal policy and inclusive growth)
    - Topics: Fiscal policy and long run growth; Fiscal policy and inequality; Case studies
  - Unit 6: 3 hours (L–6 Fiscal accounts and fiscal aggregates measures)
    - Topics: Fiscal accounts and the public sector; Stocks and flows measures; Cash and accrual measures
  - W–3 Workshop: Fiscal accounts and fiscal analysis
    - Tasks: Differences between GFSM 1986 and GFSM 2001 and implications for fiscal analysis; Illustrative consolidation exercise

- Day 4
  - Unit 7: 3 hours (L–7 Fiscal projections)
    - Topics: Macroeconomic assumptions; The effective tax rate, buoyancy and elasticity approaches; Discretionary vs. non-discretionary spending; Budget financing needs, domestic vs. external financing tradeoff and cross-sector consistency checks
  - W–4 Workshop: Fiscal projections
    - Tasks: Forecasting revenues and expenditures; Deficit financing
  - Discussion: 1.5 hours (O–2 Participants’ discussion)
    - Questions: Main takeaways so far; Any areas for clarification?
  - Presentations preparation: 1.5 hours (O–3 Selection of topics; Formation of groups)

- Day 5
  - Unit 8: 6 hours (L–8 Fiscal sustainability, debt tolerance, and fiscal space)
    - Topics: Fiscal sustainability: debt projections and risks; Debt tolerance across countries and over time; Fiscal space: optimal and safe debt levels, interest rates
  - W–5 Workshop: Basic debt dynamics
    - Scenarios: Baseline scenario; Alternative scenarios

- Day 6
  - Unit 9: 3 hours (L–9 Fiscal multipliers)
    - Topics: Theory and empirics; Factors influencing the size of multipliers; Estimation and use
  - W–6 Workshop: Fiscal multipliers
    - Tasks: Computing multipliers; Interpreting multipliers; Fiscal policy assessment
  - Unit 10: 3 hours (L–10 Measuring the fiscal stance)
    - Topics: Output gap, cyclically-adjusted (CA) and structural balance; Fiscal elasticities and fiscal stance; Case studies
  - W–7 Workshop: Measuring the fiscal stance
    - Tasks: Methods to estimate the output gap; Estimating and interpreting fiscal elasticities and computing CA and structural balances; Interpreting the fiscal stance and fiscal impulse

- Day 7
  - Unit 11: 3 hours (L–11 NC e.g. Expenditure Policy: Investment spending)
    - Topics: Concepts; Investment and development: theory and evidence; Investment, efficiency and fiscal stability
  - W–8 NC Workshop: Investment spending
    - Tasks: Returns to public investment; Public investment and growth
  - Presentations: 3 hours (O–4 Participants’ presentations: Preparation)

- Day 8
  - Unit 12: 3 hours (L–12 Non-core lecture, e.g. NC Unit 2)
  - W–9 Non-core workshop
  - Presentations: 3 hours (O–5 Participants’ presentations: Preparation)

- Day 9
  - Presentations: 6 hours (O–6 Participants’ presentations: Preparation)

- Day 10
  - Presentations: 2 hours (O–7 Participants’ presentations)
  - Final Quiz and course evaluation
  - Closing Session and Presentation of Certificates

### Non-core units and workshops (detailed topics)
- NC Unit 1: Fiscal policy for the crisis and post-crisis period
  - Topics: The pre-crisis debate; The effect of the crisis on the debate; Fiscal policy and long term growth
  - NCW–1 Workshop: Fiscal policy for the crisis and post-crisis period
- NC Unit 2: Fiscal frameworks in resource-rich countries
  - Topics: Consumption, investment and savings; International experiences; Analytical frameworks and its caveats
  - NCW–2 Workshop: Fiscal frameworks in resource-rich countries
- NC Unit 3: Expenditure subsidy reform
  - Topics: Subsidies: definitions and trends; A strategy for subsidy reforms
  - NCW–3 Workshop: Case studies on subsidy reform; Subsidy excel workshop
- NC Unit 4: Dealing with volatility
  - Topics: Business cycles in LICs and EMs; Inflation and exchange rates; Financial crashes and sudden stops
  - NCW Unit–4 Workshop: Computation of the standard volatility measures (business cycles, consumption to output and government spending to output ratios); Interest rate spreads and exchange rate; Banks and the feedback loop
- NC Unit 5: Expenditure Policy: Investment spending
  - Topics: Definitions and trends; Public Investment Management Assessment; Infrastructure gaps and scaling-up
  - NCW Unit–5 Workshop: Identifying challenges; Designing a public investment program

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_Source: https://www.imf.org/-/media/files/icd/fpa.pdf_