In Search of Lost Revenue: Why Restoring Fiscal Soundness After a Crisis is Harder Than it Looks

Masato Miyazaki

No 2010/137, IMF Working Papers from International Monetary Fund

Abstract: This note argues that because fiscal deficit after a crisis owe much to a drop in tax revenues and a sluggish revenue growth, its adjustment has to rely more on revenue augmentation than commonly thought. Cutting extra spending in the wake of the crisis would not balance the book, while a natural growth of tax revenue after the recovery may take a long time before financing the pre-crisis level of expenditure. Faced with unpopular choices, the government may implicitly prefer seeing higher inflation.

Keywords: WP; revenue; spending cut; crisis; expenditure level; rate; fiscal deficit; exit strategy; tax; revenue growth; expenditure growth; revenue equilibrium; wasteful spending; trend rate; Fiscal consolidation; Public employment; Global (search for similar items in EconPapers)
Pages: 21
Date: 2010-06-01
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Citations: View citations in EconPapers (1)

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