The Effects of Fiscal Consolidations on the Debt Distribution
IMF Working Papers, October 3, 2025
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Bibliographic details
- Authors: Francesco Frangiamore, Davide Furceri, Domenico Giannone, Faizaan Kisat, Pietro Pizzuto
- Published: October 3, 2025
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9798229025331.001
Study scope and methodology
- Authors: Francesco Frangiamore, Davide Furceri, Domenico Giannone, Faizaan Kisat, Pietro Pizzuto
- Date: October 3, 2025
- Sample: an unbalanced sample of 192 countries over the period 1991-2021
- Methods: panel location-scale models to estimate effects of fiscal expenditure consolidations on the entire distribution of public debt-to-GDP
Key findings on debt levels and distribution
- Government expenditure cuts significantly lower the location (average) of the future debt-to-GDP distribution.
- Government expenditure cuts significantly lower the scale (variance) of the future debt-to-GDP distribution, implying a reduction in the uncertainty surrounding public debt.
- There is a downward sloping trend in the effects of government expenditure consolidations across the quantiles of the debt-to-GDP distribution.
- The largest reductions occur on the right tail of the debt-to-GDP distribution, defined as debt-at-risk.
Persistence and horizons
- The effects of government expenditure consolidations persist up to a 4-year forecast horizon.
Heterogeneity and conditional effectiveness
- Fiscal expenditure consolidations are more effective in reducing debt-to-GDP when the debt levels are higher.
- Fiscal expenditure consolidations are more effective in reducing debt-to-GDP when countries adopt a fiscal rule.
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