What Sustains Fiscal Consolidations in Emerging Market Countries?

ByBenedict J. Clements, Sanjeev Gupta, Erwin H Tiongson, Emanuele Baldacci

November 1, 2003

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper examines the factors affecting the persistence of fiscal consolidation in 25 emerging market countries during 1980-2001. It proposes a new approach for defining spells of fiscal consolidation. The results indicate that the probability of ending a fiscal adjustment is affected by the legacy of previous fiscal failures, the size of the deficit, the composition of spending, and level of total revenues. There is also some evidence that the initial debt stock, exchange rate developments, inflation, and the unemployment rate have an impact on the persistence of adjustments.

Subject: Asset and liability management, Debt reduction, Fiscal consolidation, Fiscal policy, Government debt management, Public debt, Public financial management (PFM)

Keywords: Africa, Asia and Pacific, Central Africa, debt country, Debt reduction, debt-to-GDP, deficit, deficit level, deficit reduction, deficit threshold, East Africa, emerging markets, exchange rate depreciation, expenditure program, expenditure reduction, fiscal adjustment, fiscal consolidation, Government debt management, government outlay, Middle East, spending, such deficit reduction, survival analysis, WP

Pages:
27
Volume:
2003
DOI:
https://doi.org/10.5089/9781451875348.001
Issue:
224
Series:
Working Paper No. 2003/224
Stock No:
WPIEA2242003
ISBN:
9781451875348
ISSN:
1018-5941

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