European Parliament Library

How Much is A Lot? Historical Evidence on the Size of Fiscal Adjustments, Julio Escolano, Laura Jaramillo, Carlos Mulas-Granados, G. Terrier

Classification
2
Label
How Much is A Lot? Historical Evidence on the Size of Fiscal Adjustments, Julio Escolano, Laura Jaramillo, Carlos Mulas-Granados, G. Terrier
Language
eng
Abstract
The sizeable fiscal consolidation required to stabilize the debt-to-GDP ratios in several countries in the aftermath of the global crisis raises a crucial question on its feasibility. To answer this question, we rely on historical evidence from a sample of 91 adjustment episodes of countries during 1945–2012 that needed and wanted to adjust in order to stabilize debt to GDP. We find that, in at least half the cases, countries improved their cyclically adjusted primary balances by close to 5 percent of GDP. We also observe that, while countries typically make substantial efforts to stabilize debt, once this objective is achieved, they tend to ease their primary balances and do not necessarily get back to their initial lower debt-to-GDP ratio. We find that consolidations tended to be larger when the initial deficit was high and adjustment efforts were sustained over time. Fiscal adjustments also tended to be larger when accompanied by an easing of monetary conditions and, to a lesser extent, by an improvement in credit conditions
Bibliography note
Includes bibliographical references
resource.governmentPublication
international or intergovernmental publication
Literary form
non fiction
Main title
How Much is A Lot? Historical Evidence on the Size of Fiscal Adjustments
Nature of contents
dictionaries
Responsibility statement
Julio Escolano, Laura Jaramillo, Carlos Mulas-Granados, G. Terrier
Series statement
IMF Working Papers
Table of contents
Cover; Abstract; Contents; I. Introduction; II. State of the Debate; Tables; 1. Literature Review on Fiscal Consolidation; III. Selection of Episodes; A. Criterion 1: A Fiscal Adjustment Need Exists; B. Criterion 2: There Is the Intention to Implement Discretionary Fiscal Adjustment; C. Relevant Episodes; 2. Sample Coverage; IV. Characteristics of Fiscal Adjustments; A. What Level of Primary Balance was Achieved?; 3. Characteristics of Fiscal Adjustment; 4. Distribution of Levels and Changes in the Actual and Cyclically Adjusted Primary BalancesB. What was the Total Size of Fiscal Consolidation?5. Level and Changes in CAPB Across Alternative Samples; C. Was Adjustment Enough to Stabilize Debt?; Figures; 1.Primary Gaps at t and End of the Episode; 2. Debt and CAPB, Median Across Episodes; D. Accompanying Factors; 3. Primary Gap and the Interest Rate-Growth Differential; 4. Accompanying Factors; V. Empirical Model; A. Model Specification and Data Sources; B. Results; 6. Determinants of the Size of Fiscal Adjustment; VI. How Much Is A Lot?; 7. Determinants of the Size of Fiscal Adjustment, Robustness Check5. Contribution from Accompanying Factors to Fiscal AdjustmentVII. Conclusions; Appendix Table; List of Episodes; References

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