Stock-Flow Adjustments and Fiscal Transparency: A Cross-Country Comparison
IMF Working Papers, January 1, 2012
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- Stock-Flow Adjustments and Fiscal Transparency: A Cross-Country Comparison
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Bibliographic details
- Authors: Anke Weber
- Published: January 1, 2012
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781463933821.001
Summary and scope
- Focus: Investigates determinants of discrepancies between the annual change in public debt and the budget deficit (stock-flow adjustments) and their relationship with fiscal transparency.
- Coverage: Data for 163 countries.
- Timeframe context: Over the past three decades.
- Objective: Determine how balance sheet effects, realization of contingent liabilities, and country-specific factors explain stock-flow adjustments and how fiscal transparency relates to their magnitude and contribution to debt increases.
Key findings
- Large and persistent discrepancies between the annual change in public debt and the budget deficit (stock-flow adjustments) were a prominent feature of debt dynamics in many economies over the past three decades.
- Such discrepancies can only be partly explained by balance sheet effects and the realization of contingent liabilities.
- Significant differences exist in average stock-flow adjustments across countries, reflecting country-specific factors.
- The more fiscally transparent the country, the smaller these stock-flow adjustments tend to be.
- The contribution of stock-flow adjustments to increases in debt is smaller in countries with above average fiscal transparency.
- A lack of fiscal transparency may make it easier for governments to engage in deceptive fiscal stratagems.
Data, methods, and technical focus
- Empirical base: Data for 163 countries.
- Concepts and terminology preserved from source: stock-flow adjustment; accumulation equation; balance sheet effect; contingent liabilities; public debt; debt increase; debt decrease; debt change; debt-reducing measure; financial assets accumulation.
- Subject areas emphasized: Asset and liability management; Banking crises; Budget planning and preparation; Debt reduction; Financial crises; Fiscal transparency; Government debt management; Public debt; Public financial management (PFM).
Policy implications and interpretation
- Improving fiscal transparency is associated with smaller stock-flow adjustments and a reduced role of such adjustments in driving debt increases.
- Strengthening transparency may reduce opportunities for deceptive fiscal stratagems that exacerbate undisclosed or misreported contributions to public debt.
- Monitoring balance sheet effects and contingent liabilities remains important but does not fully account for cross-country variation in stock-flow adjustments, implying the need for country-specific diagnostic and institutional responses.