Fiscal Adjustment in Transition Countries: Evidence From the 1990's
IMF Working Papers, February 1, 2003
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- Fiscal Adjustment in Transition Countries: Evidence From the 1990's
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Bibliographic details
- Authors: Catriona Purfield
- Published: February 1, 2003
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451845471.001
Overview
- Author: Catriona Purfield
- Date: February 1, 2003
- Series: Working Paper No. 2003/036
- Summary (as stated in the source):
In the 1990s, transition countries underwent large adjustments to address fiscal imbalances. This paper examines whether the factors identified in the literature on advanced economies, the size and composition of adjustment, are important in transition economies. It finds that larger consolidations were more successful in addressing fiscal imbalances on a durable basis. Policies focusing on expenditure reductions were more successful than those relying on revenue increases. There is little evidence of expansionary fiscal contractions, but fiscal contractions did not have a significantly negative impact on growth either. Few fiscal stimuli succeeded in boosting growth.
Major Findings
- Larger fiscal consolidations were more successful in addressing fiscal imbalances on a durable basis.
- Policies focusing on expenditure reductions were more successful than those relying on revenue increases.
- There is little evidence of expansionary fiscal contractions in transition countries during the 1990s.
- Fiscal contractions did not have a significantly negative impact on growth.
- Few fiscal stimuli succeeded in boosting growth.
Policy Implications and Interpretation
- Emphasize expenditure-based consolidation as a more durable approach to correcting fiscal imbalances in transition economies.
- Caution against expecting widespread expansionary effects from fiscal contractions in transition contexts.
- Recognition that fiscal stimuli rarely succeeded in boosting growth in the 1990s transition-country experiences examined.