{
  "title": "Assessing the Impact and Phasing of Multi-year Fiscal Adjustment: A General Framework",
  "publication": "IMF Working Papers, August 21, 2013",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2016/12/31/assessing-the-impact-and-phasing-of-multi-year-fiscal-adjustment-a-general-framework-40884",
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  "summary": "This paper provides a general framework to assess the output and debt dynamics of an economy undertaking multi-year fiscal adjustment. The framework allows country-specific assumptions about the magnitude and persistence of fiscal multipliers, hysteresis effects, and endogenous financing costs.",
  "sections": [
    {
      "heading": "Framework and methodology",
      "content": "- Provides a general framework to assess output and debt dynamics of an economy undertaking multi-year fiscal adjustment.\n- Allows country-specific assumptions about:\n  - the magnitude and persistence of fiscal multipliers,\n  - hysteresis effects,\n  - endogenous financing costs.\n- Designed to inform macro projections and shed light on appropriate phasing of fiscal consolidation (front-loaded versus back-loaded).\n- Applied to stylized advanced and emerging economy examples."
    },
    {
      "heading": "Major findings",
      "content": "- For a highly-indebted economy undertaking large multi-year fiscal consolidation, high multipliers do not always argue against frontloaded adjustment.\n- The case for more gradual or back-loaded adjustment is strongest when hysteresis effects are in play, but this must be balanced against implications for debt sustainability.\n- Application to actual country examples tends to cast doubt on claims that very large multipliers have been operating post-crisis.\n- It appears that GDP forecast errors for Greece may have been due more to over-optimism on potential growth estimates than to underestimating fiscal multipliers."
    },
    {
      "heading": "Policy implications and considerations",
      "content": "- Phasing decisions (front-loaded vs. back-loaded) should weigh:\n  - country-specific fiscal multiplier estimates,\n  - the presence and magnitude of hysteresis effects,\n  - endogenous financing cost responses,\n  - debt sustainability constraints for highly indebted economies.\n- High multipliers alone do not automatically imply that consolidation should be back-loaded; assessment must consider debt dynamics and sustainability trade-offs."
    },
    {
      "heading": "Application and scope",
      "content": "- Framework applied to stylized advanced and emerging economy examples to illustrate interactions among multipliers, hysteresis, and financing costs.\n- Also applied to actual country examples to evaluate post-crisis multiplier claims and forecast errors.\n\n---\n\n Content in this bundle\n\n- Microsoft Word - DMSDR1S-5095902-v9-SPREM2013WPFiscalMultipliers-February.DOCX\n  - Microsoft Word - DMSDR1S-5095902-v9-SPREM2013WPFiscalMultipliers-February.DOCX (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Microsoft Word - DMSDR1S-5095902-v9-SPREM2013WPFiscalMultipliers-February.DOCX (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2016/12/31/assessing-the-impact-and-phasing-of-multi-year-fiscal-adjustment-a-general-framework-40884"
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    "Authors: Ran Bi, Haonan Qu, James Roaf",
    "Published: August 21, 2013",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781484318669.001",
    "Provides a general framework to assess output and debt dynamics of an economy undertaking multi-year fiscal adjustment.",
    "Allows country-specific assumptions about:",
    "Designed to inform macro projections and shed light on appropriate phasing of fiscal consolidation (front-loaded versus back-loaded).",
    "Applied to stylized advanced and emerging economy examples.",
    "For a highly-indebted economy undertaking large multi-year fiscal consolidation, high multipliers do not always argue against frontloaded adjustment.",
    "The case for more gradual or back-loaded adjustment is strongest when hysteresis effects are in play, but this must be balanced against implications for debt sustainability.",
    "Application to actual country examples tends to cast doubt on claims that very large multipliers have been operating post-crisis.",
    "It appears that GDP forecast errors for Greece may have been due more to over-optimism on potential growth estimates than to underestimating fiscal multipliers.",
    "Phasing decisions (front-loaded vs. back-loaded) should weigh:",
    "High multipliers alone do not automatically imply that consolidation should be back-loaded; assessment must consider debt dynamics and sustainability trade-offs.",
    "Framework applied to stylized advanced and emerging economy examples to illustrate interactions among multipliers, hysteresis, and financing costs.",
    "Also applied to actual country examples to evaluate post-crisis multiplier claims and forecast errors.",
    "**Microsoft Word - DMSDR1S-#5095902-v9-SPREM_2013_WP_Fiscal_Multipliers_-_February.DOCX**"
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