Fiscal Monitor

Debt: Use it Wisely

October 2016

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Drawing on an expanded data set covering emerging markets and low-income countries as well as advanced economies, this chapter examines the extent and makeup of global debt and asks what role fiscal policy can play in facilitating the adjustment. The analytical framework explicitly models the interlinkages between private and public debt in analyzing the role of fiscal policy in the deleveraging process. Country case studies provide useful insights on what fiscal policy should and should not do to facilitate deleveraging while minimizing the drag on the economy.

Contents

Front Matter

Chapter 1: Debt: Use it Wisely

  • Introduction
  • How High Is Debt?
  • Why Does the Level of Debt Matter?
  • Fiscal Policy and Private Sector Deleveraging
  • Deleveraging in Practice: What Does History Teach Us?
  • Conclusion
Boxes
1.1 China: What Do We Know about the General Government’s Balance Sheet?
1.2 The Role of Fiscal Policy during Financial Recessions
1.3 Brazil: Private Debt and the Strength of the Public Sector Balance Sheet
1.4 Benefits of Targeted Fiscal Intervention during Times of Private Deleveraging
1.5 How Much Do Financial Markets Value Government Balance Sheets?
Annex
1.1 Debt Data Set
1.2 Private and Public Debt and the Pace of the Recovery
1.3 Interlinkages between Public and Private Debt: Selected Summary of the Literature
1.4 Private Deleveraging and the Role of Fiscal Policy
1.5 Policies during Deleveraging Episodes
  • References

Methodological and Statistical Appendix

  • Data and Conventions
  • Fiscal Policy Assumptions
  • Definition and Coverage of Fiscal Data
  •     Table A. Economy Groupings
  •     Table B. Advanced Economies: Definition and Coverage of
        Fiscal Monitor  Data
  •     Table C. Emerging Market and Middle-Income Economies: Definition     and Coverage of Fiscal Monitor  Data
  •     Table D. Low-Income Developing Countries: Definition and Coverage     of Fiscal Monitor  Data
  • Statistical of Tables
    •     Advanced Economies (A1–A8)
    •     Emerging Market and Middle-Income Economies (A9–A16)
    •     Low-Income Developing Countries (A17–A22)
    •     Structural Fiscal Indicators (A23–A25)

Country Abbreviations and Glossary

Fiscal Monitor, Selected Topics

  • Fiscal Monitor Archives
  • I. Adjustment
  • II. Commodities and Energy
  • III. Country Cases
  • IV. Crises Shocks
  • V. Emerging Markets
  • VI. Employment
  • VII. Financial Sector
  • VIII. Fiscal Outlook
  • IX. Government Debt
  • X. Private Debt
  • XI. Growth
  • XII. Innovation, Entrepreneurship, Research, and Development
  • XIII. Interest Rates
  • XIV. Low-Income Countries
  • XV. Policy and Reform
  • XVI. Privatization, Public Enterprises
  • XVII. Revenue
  • XIX. Stabilization
  • XX. Stimulus
  • XXI. Subsidies
  • XXII. Sustainability and Risk Management
  • XXIII. Taxes

IMF Executive Board Discussion Summary

Figures and Tables

Figures
1.1 Global Gross Debt
1.2 Gross Debt by Country Groups
1.3 Sectoral Changes in Debt
1.4 Advanced Economies: Debt Developments
1.5 Emerging Market Economies: Debt Developments
1.6 Low-Income Countries: Debt Developments
1.7 Debt Decomposition
1.8 Selected Advanced Economies: Current Deleveraging Episodes
1.9 Total Private Debt during Deleveraging Episodes
1.10 Selected Advanced Economies: Leverage
1.11 Public Debt in Normal and Financial Recessions
1.12 Europe: Estimated Capital Impact of Immediate Nonperforming Loan Disposal, Density Function
1.13 Contribution to Deleveraging
1.14 Macroeconomic Policies and Deleveraging
1.1.1 China and Other Emerging Market Economies: Estimates of Net Financial Worth at the End of 2015
1.2.1 Fiscal Policy and the Nature of the Recovery after Financial Crises
1.3.1 Change in Debt, 2005–15: Brazil versus Other Emerging Market Economies
1.3.2 Brazil: Change in Stock of Bank Credit
1.4.1 Impact of Targeted Interventions in a Deleveraging Phase
1.5.1 Difference between Market-Implied and Accounting-Valued Net Worth, 2014
1.5.2 Median Evolution of Market-Implied Net Worth, 2012–15
1.5.3 Change in Market-Implied Expected Losses on Sovereign Debt, 2012–15
Annex Figure 1.1.1. Nonfinancial Private Sector Debt: Country Coverage
Tables
1.1 Private Sector Deleveraging Episodes: Basic Facts
1.2 Selected Fiscal Policy Interventions during Deleveraging Episodes
1.3 Costs of Selected Fiscal Policy Interventions
1.3.1 Brazil: Public Sector Balance Sheet, 2014
Annex Table 1.2.1 Advanced Economies: Local Projection Results from Equation (A1.2.1)
Annex Table 1.2.2 Emerging Market Economies: Local Projection Results from Equation (A1.2.1)
Annex Table 1.5.1 Private Sector Deleveraging Case Studies: Macroeconomic Conditions
Annex Table 1.5.2 Costs of Selected U.S. Fiscal Interventions
A Economy Groupings
B Advanced Economies: Definition and Coverage of Fiscal Monitor Data
C Emerging Market and Middle-Income Economies: Definition and Coverage of Fiscal Monitor Data
D Low-Income Developing Countries: Definition and Coverage of Fiscal Monitor Data
A1 Advanced Economies: General Government Overall Balance, 2007–21
A2 Advanced Economies: General Government Primary Balance, 2007–21
A3 Advanced Economies: General Government Cyclically Adjusted Balance, 2007–21
A4 Advanced Economies: General Government Cyclically Adjusted Primary Balance, 2007–21
A5 Advanced Economies: General Government Revenue, 2007–21
A6 Advanced Economies: General Government Expenditure, 2007–21
A7 Advanced Economies: General Government Gross Debt, 2007–21
A8 Advanced Economies: General Government Net Debt, 2007–21
A9 Emerging Market and Middle-Income Economies: General Government Overall Balance, 2007–21
A10 Emerging Market and Middle-Income Economies: General Government Primary Balance, 2007–21
A11 Emerging Market and Middle-Income Economies: General Government Cyclically Adjusted Balance, 2007–21
A12 Emerging Market and Middle-Income Economies: General Government Cyclically Adjusted Primary Balance, 2007–21
A13 Emerging Market and Middle-Income Economies: General Government Revenue, 2007–21
A14 Emerging Market and Middle-Income Economies: General Government Expenditure, 2007–21
A15 Emerging Market and Middle-Income Economies: General Government Gross Debt, 2007–21
A16 Emerging Market and Middle-Income Economies: General Government Net Debt, 2007–21
A17 Low-Income Developing Countries: General Government Overall Balance, 2007–21
A18 Low-Income Developing Countries: General Government Primary Balance, 2007–21
A19 Low-Income Developing Countries: General Government Revenue, 2007–21
A20 Low-Income Developing Countries: General Government Expenditure, 2007–21
A21 Low-Income Developing Countries: General Government Gross Debt, 2007–21
A22 Low-Income Developing Countries: General Government Net Debt, 2007–21
A23 Advanced Economies: Structural Fiscal Indicators
A24 Emerging Market and Middle-Income Economies: Structural Fiscal Indicators
A25 Low-Income Developing Countries: Structural Fiscal Indicators

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