{
  "title": "Breaking the Impediments to Budgetary Reforms: Evidence from Europe",
  "publication": "IMF Working Papers, March 1, 2008",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2016/12/31/breaking-the-impediments-to-budgetary-reforms-evidence-from-europe-21836",
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  "summary": "Under what conditions are budget institutions likely to be strengthened? We find that fiscal deficits do not help in focusing policymakers on undertaking reforms. To the contrary, the larger the deficit, the lower is the likelihood of reforms.",
  "sections": [
    {
      "heading": "Summary / Key findings",
      "content": "- Fiscal deficits do not help in focusing policymakers on undertaking reforms; the larger the deficit, the lower is the likelihood of reforms.\n- Large deficits apparently imply strong claims on the budget and generate unwillingness to impose self-discipline.\n- Countries will tend to move either to small fiscal deficits and good institutions or large deficits and weak institutions.\n- Economic shocks (if they are large enough) can help build a constituency for improving budget institutions.\n- If forgiving markets accommodate economic shocks, even such pressure may be insufficient to spur reform.\n- Forwardlooking and credible leadership appears to be an important ingredient of the solution."
    },
    {
      "heading": "Drivers and scenarios examined",
      "content": "- Relationship between fiscal deficits and the likelihood of budgetary reform.\n- Role of economic shocks in creating political constituencies for reform.\n- Influence of market responses (forgiving markets) in reducing pressure for institutional change.\n- Importance of forwardlooking and credible leadership in enabling reforms."
    },
    {
      "heading": "Policy implications and recommendations",
      "content": "- Reforms are less likely when deficits are large due to stronger competing claims on the budget that reduce willingness for self-discipline.\n- Relying on fiscal distress alone is insufficient; large enough economic shocks may be required to build reform constituencies.\n- Strengthening budget institutions likely requires leadership that is both forwardlooking and credible.\n- Policymakers should be aware that market accommodation of shocks can blunt incentives for institutional reform."
    },
    {
      "heading": "Metadata and keywords",
      "content": "- Authors: Ashoka Mody, Stefania Fabrizio\n- Date: March 1, 2008\n- Pages: 31\n- Series: Working Paper No. 2008/082\n- Volume: 2008\n- Issue: 082\n- DOI: https://doi.org/10.5089/9781451869439.001\n- Stock No: WPIEA2008082\n- ISBN: 9781451869439\n- ISSN: 1018-5941\n- Subject: Budget planning and preparation, Current account deficits, Fiscal stance, Government debt management, Inflation\n- Keywords: current account, government fractionalization, government ideology, rightist government, status quo, WP\n\nIMF Working Paper — \"Breaking the Impediments to Budgetary Reforms: Evidence from Europe\", Ashoka Mody and Stefania Fabrizio, March 1, 2008; Working Paper No. 2008/082; DOI: https://doi.org/10.5089/9781451869439.001\n\n---\n\n Content in this bundle\n\n- wp0882\n  - wp0882 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - wp0882 (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2016/12/31/breaking-the-impediments-to-budgetary-reforms-evidence-from-europe-21836"
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    "Authors: Ashoka Mody, Stefania Fabrizio",
    "Published: March 1, 2008",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781451869439.001",
    "Fiscal deficits do not help in focusing policymakers on undertaking reforms; the larger the deficit, the lower is the likelihood of reforms.",
    "Large deficits apparently imply strong claims on the budget and generate unwillingness to impose self-discipline.",
    "Countries will tend to move either to small fiscal deficits and good institutions or large deficits and weak institutions.",
    "Economic shocks (if they are large enough) can help build a constituency for improving budget institutions.",
    "If forgiving markets accommodate economic shocks, even such pressure may be insufficient to spur reform.",
    "Forwardlooking and credible leadership appears to be an important ingredient of the solution.",
    "Relationship between fiscal deficits and the likelihood of budgetary reform.",
    "Role of economic shocks in creating political constituencies for reform.",
    "Influence of market responses (forgiving markets) in reducing pressure for institutional change.",
    "Importance of forwardlooking and credible leadership in enabling reforms.",
    "Reforms are less likely when deficits are large due to stronger competing claims on the budget that reduce willingness for self-discipline.",
    "Relying on fiscal distress alone is insufficient; large enough economic shocks may be required to build reform constituencies.",
    "Strengthening budget institutions likely requires leadership that is both forwardlooking and credible.",
    "Policymakers should be aware that market accommodation of shocks can blunt incentives for institutional reform.",
    "Authors: Ashoka Mody, Stefania Fabrizio",
    "Date: March 1, 2008",
    "Pages: 31",
    "Series: Working Paper No. 2008/082",
    "Volume: 2008",
    "Issue: 082",
    "DOI: https://doi.org/10.5089/9781451869439.001",
    "Stock No: WPIEA2008082",
    "ISBN: 9781451869439",
    "ISSN: 1018-5941",
    "Subject: Budget planning and preparation, Current account deficits, Fiscal stance, Government debt management, Inflation",
    "Keywords: current account, government fractionalization, government ideology, rightist government, status quo, WP",
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