Evidenceon the Fiscal and Macroeconomic Impact of Privatization

IMF Working Papers, July 1, 2000

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Evidenceon the Fiscal and Macroeconomic Impact of Privatization

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Bibliographic details

• Authors: Steven A Barnett
• Published: July 1, 2000
• Series: IMF Working Papers
• DOI: https://doi.org/10.5089/9781451855180.001

Summary findings

• The paper empirically investigates the relationship between privatization and measures of fiscal and macroeconomic performance.
• Privatization proceeds transferred to the budget tend to be saved.
  • They are largely used to reduce domestic financing.
  • There is little evidence that they are used to finance a larger deficit.
• Total privatization (as opposed to just the proceeds transferred to the budget) is correlated with an improvement in macroeconomic performance.
  • Manifestations include higher real GDP growth and lower unemployment.
  • The correlation should be interpreted cautiously because the evidence is not sufficient to establish causality.
• The analysis of proceeds transferred to the budget is, by construction, restricted to those proceeds, leaving open the question of what happens to privatization proceeds not transferred to the budget.

Methodological scope and limitations

• The study distinguishes between:
  • Privatization proceeds transferred to the budget (analyzed for fiscal use and financing implications).
  • Total privatization (analyzed for correlation with macroeconomic outcomes).
• Limitation highlighted:
  • Findings on budget-transferred proceeds do not inform the allocation or macroeconomic effects of proceeds not transferred to the budget.
• Causality:
  • Correlations between total privatization and macroeconomic improvement are not sufficient to establish causality.

Policy-relevant implications

• When privatization proceeds are transferred to the budget, they tend to be saved and used to reduce domestic financing rather than increasing deficits.
• Policymakers should be cautious in interpreting positive correlations between privatization and macroeconomic outcomes as causal effects.
• The disposition of privatization proceeds not transferred to the budget remains an open policy and analytical question.

Content in this bundle

• Evidence on the Fiscal and Macroeconomic Impact of Privatization -WP/00/130
  • Evidence on the Fiscal and Macroeconomic Impact of Privatization -WP/00/130 (Markdown version)
  • Evidence on the Fiscal and Macroeconomic Impact of Privatization -WP/00/130 (PDF)