Underlying Factors Driving Fiscal Effort in Emerging Market Economies

Taimur Baig and Abdul Abiad

No 2005/106, IMF Working Papers from International Monetary Fund

Abstract: Using a panel dataset of 34 emerging market countries for the period 1990-2002, we examine the roles of various economic, political, and institutional variables in determining fiscal effort, as proxied by the primary surplus. We find that while fiscal effort increases, as expected, with the level of lagged debt, this effect tapers off beyond a certain threshold. We also find an inverse U-shaped relationship between the primary balance and revenue. Fiscal effort rises with positive shocks to oil prices (for oil exporters), when the economy grows above its potential, and in the presence of an IMF-supported program. In contrast, high democratic accountability and strong and impartial bureaucracies help lower market risk and hence lower the relative need for fiscal adjustment. Finally, fiscal effort tends to decline when too many constraints are faced by the executive.

Keywords: WP; debt; variable; government (search for similar items in EconPapers)
Pages: 28
Date: 2005-06-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (17)

Downloads: (external link)
http://www.imf.org/external/pubs/cat/longres.aspx?sk=18214 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:imf:imfwpa:2005/106

Ordering information: This working paper can be ordered from
http://www.imf.org/external/pubs/pubs/ord_info.htm

Access Statistics for this paper

More papers in IMF Working Papers from International Monetary Fund International Monetary Fund, Washington, DC USA. Contact information at EDIRC.
Bibliographic data for series maintained by Akshay Modi ().