When do we repair the roof? Insights from responses to fiscal crisis early warning signals

Jiro Honda, René Tapsoba and Ismael Issifou

International Economics, 2022, issue 172, 349-367

Abstract: Should policymakers wait for fiscal crisis early warning signals before repairing the roof? We answer this question by investigating the interlinkages between early warning signals for fiscal crises, policy responses, and policy outcomes, using a broad panel of 119 countries. We find that fiscal adjustment is a good remedy for countries that act proactively, reducing their likelihood of facing fiscal crisis by up to 60 percent. These findings highlight the prominence of strengthening institutions towards further incentivizing policymakers to repair the roof when the sun is shining.

Keywords: Early warning signal; Fiscal consolidation; Fiscal crisis (search for similar items in EconPapers)
JEL-codes: E62 H62 H68 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:cii:cepiie:2022-q3-172-25

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