{
  "title": "How Effective is Fiscal Policy Response in Systemic Banking Crises?",
  "publication": "IMF Working Papers, July 1, 2009",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2016/12/31/how-effective-is-fiscal-policy-response-in-systemic-banking-crises-23130",
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  "summary": "This paper studies the effects of fiscal policy response in 118 episodes of systemic banking crisis in advanced and emerging market countries during 1980-2008. It finds that timely countercyclical fiscal measures contribute to shortening the length of crisis episodes by stimulating aggregate demand.",
  "sections": [
    {
      "heading": "Study scope and metadata",
      "content": "- Authors: Sanjeev Gupta, Carlos Mulas-Granados, Emanuele Baldacci\n- Date: July 1, 2009\n- Sample: 118 episodes of systemic banking crisis in advanced and emerging market countries during 1980-2008\n- Publication: IMF Working Papers, Working Paper No. 2009/160, Issue 160, Volume 2009, Pages: 38\n- DOI: https://doi.org/10.5089/9781451873078.001\n- Stock No: WPIEA2009160\n- ISBN: 9781451873078\n- ISSN: 1018-5941"
    },
    {
      "heading": "Core findings",
      "content": "- Timeliness and countercyclicality\n  - Timely countercyclical fiscal measures contribute to shortening the length of crisis episodes by stimulating aggregate demand.\n- Composition of fiscal expansions and crisis duration\n  - Fiscal expansions that rely mostly on measures to support government consumption are more effective in shortening the crisis duration than those based on public investment or income tax cuts.\n- Fiscal space and funding constraints\n  - The effectiveness of fiscal expansions in shortening crisis duration does not hold for countries with limited fiscal space where fiscal expansions are prevented by funding constraints.\n- Composition and output recovery\n  - The composition of countercyclical fiscal responses matters for output recovery after the crisis, with public investment yielding the strongest impact on growth.\n- Trade-off identified\n  - The results suggest a potential trade-off between short-run aggregate demand support and medium-term productivity growth objectives in fiscal stimulus packages adopted in distress times."
    },
    {
      "heading": "Policy implications and considerations",
      "content": "- Prioritize timeliness: Implement countercyclical fiscal measures promptly during systemic banking crises to help shorten crisis duration via aggregate demand stimulus.\n- Consider composition trade-offs:\n  - Government consumption-focused fiscal expansions: more effective at shortening crisis duration in settings with available fiscal space.\n  - Public investment: strongest impact on growth during output recovery, supporting medium-term productivity.\n  - Income tax cuts: less effective at shortening crisis duration compared with measures supporting government consumption.\n- Fiscal space assessment:\n  - Evaluate funding constraints and fiscal space before deploying expansionary fiscal policy; limited fiscal space can prevent the effectiveness of fiscal expansions.\n- Balance objectives:\n  - Design stimulus packages mindful of the potential trade-off between immediate demand stabilization and medium-term productivity-enhancing public investment.\n\nThis summary is based on the IMF Working Paper \"How Effective is Fiscal Policy Response in Systemic Banking Crises?\" by Sanjeev Gupta, Carlos Mulas-Granados, and Emanuele Baldacci (July 1, 2009).\n\n---\n\n Content in this bundle\n\n- 1. Fiscal Aggregates\n  - 1. Fiscal Aggregates (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - 1. Fiscal Aggregates (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2016/12/31/how-effective-is-fiscal-policy-response-in-systemic-banking-crises-23130"
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    "Authors: Sanjeev Gupta, Carlos Mulas-Granados, Emanuele Baldacci",
    "Published: July 1, 2009",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781451873078.001",
    "Authors: Sanjeev Gupta, Carlos Mulas-Granados, Emanuele Baldacci",
    "Date: July 1, 2009",
    "Sample: 118 episodes of systemic banking crisis in advanced and emerging market countries during 1980-2008",
    "Publication: IMF Working Papers, Working Paper No. 2009/160, Issue 160, Volume 2009, Pages: 38",
    "DOI: https://doi.org/10.5089/9781451873078.001",
    "Stock No: WPIEA2009160",
    "ISBN: 9781451873078",
    "ISSN: 1018-5941",
    "Timeliness and countercyclicality",
    "Composition of fiscal expansions and crisis duration",
    "Fiscal space and funding constraints",
    "Composition and output recovery",
    "Trade-off identified",
    "Prioritize timeliness: Implement countercyclical fiscal measures promptly during systemic banking crises to help shorten crisis duration via aggregate demand stimulus.",
    "Consider composition trade-offs:",
    "Fiscal space assessment:",
    "Balance objectives:",
    "**1. Fiscal Aggregates**"
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