The macroeconomics of public sector deficits: a synthesis

William Easterly and Klaus Schmidt-Hebbel

No 775, Policy Research Working Paper Series from The World Bank

Abstract: Fiscal deficits have been at the forefront of macroeconomic adjustment in the 1980s, both in developing and developed countries. Fiscal deficits were blamed in good part for the assortment of ills that beset developing countries in the 1980s: over-indebtedness leading to the debt crisis beginning in 1982, high inflation, and poor investment and growth performance. This paper will examine the evidence for the macroeconomic effects of fiscal deficits, using the results of a set of ten case studies done for the Bank research project,"The Macroeconomics of Public Sector Deficits."The ten cases were Argentina, Chile, Colombia, Cote d'Ivoire, Ghana, Morocco, Mexico, Pakistan, Thailand and Zimbabwe. The authors first present a summary of the stylized facts on fiscal adjustment. Then the results are presented of the decomposition of the deficit in the case studies. The results of the case studies are then used to relate deficits to macro economic imbalances: first by analyzing the relationship of deficits to private consumption and investment; and second by examining the relationship of deficits to external imbalances. While macroeconomic imbalances are clearly interrelated, the authors assume the effects of such an interrelationship are small and use a sequence of partial equilibrium analysis of each type of imbalance.

Keywords: Public Sector Economics&Finance; Environmental Economics&Policies; Banks&Banking Reform; Economic Stabilization; Economic Theory&Research (search for similar items in EconPapers)
Date: 1991-10-31
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (23)

Downloads: (external link)
http://www-wds.worldbank.org/external/default/WDSC ... d/PDF/multi_page.pdf (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:wbk:wbrwps:775

Access Statistics for this paper

More papers in Policy Research Working Paper Series from The World Bank 1818 H Street, N.W., Washington, DC 20433. Contact information at EDIRC.
Bibliographic data for series maintained by Roula I. Yazigi ().