IMF Working Papers

Financial Crises, Macroeconomic Shocks, and the Government Balance Sheet: A Panel Analysis

By Matteo Ruzzante

April 24, 2018

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Matteo Ruzzante. Financial Crises, Macroeconomic Shocks, and the Government Balance Sheet: A Panel Analysis, (USA: International Monetary Fund, 2018) accessed November 8, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

Government financial assets are increasingly recognized as playing an important role in assessing fiscal sustainability. However, very little research has been done on the dynamics of government financial assets compared to liabilities. In this paper, we investigate the impact of recent financial crises and macroeconomic shocks on government balance sheets, decomposing the separate effects on financial assets and liabilities. Using quarterly Government Finance Statistics (GFS) data, we analyze a panel of 27 countries over the period 1999Q1-2017Q1 through fixed effects and panel VAR techniques. Financial crises are shown to deteriorate the net financial worth of governments, but no significant impact is found on assets suggesting that they are not being used as fiscal buffers in bad times. On the contrary, countries that suffered both financial and banking crises experienced an “artificial” increase of their asset position through bank bailouts. Macroeconomic shock analyses reveal that government balance sheet items are countercyclical, but important asymmetries are found in their dynamics.

Subject: Financial crises, Financial statements, Fiscal policy, Government liabilities, Public debt, Public financial management (PFM)

Keywords: Banking Crisis, Capital structure, Debt Sustainability Analysis, Dynamics of financial assets and liability, Exchange rate, Financial Crisis, Financial crisis intensity, Financial statements, Foreign currency, Global, Government balance sheet, Government balance sheet variable, Government balance sheets of EME, Government Debt, Government Financial Assets, Government liabilities, Gross debt, Interest rate, Market value, Stabilization policy, Transmission mechanism, WP

Publication Details

  • Pages:

    55

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Working Paper No. 2018/093

  • Stock No:

    WPIEA2018093

  • ISBN:

    9781484352762

  • ISSN:

    1018-5941

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