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Fiscal crises

Paulo Medas, Tigran Poghosyan, Yizhi Xu, Juan Farah-Yacoub and Kerstin Gerling

Journal of International Money and Finance, 2018, vol. 88, issue C, 191-207

Abstract: A key objective of fiscal policy is to maintain the sustainability of public finances and avoid crises. Remarkably, only a few studies provide empirical analysis on fiscal crises. This paper presents a new database of fiscal crises covering different country groups, including low-income developing countries (LIDCs) that have been mostly overlooked in the past. We also shed some light on policies and economic dynamics around crises. Surprisingly, advanced economies face greater turbulence, with half of them experiencing economic contractions during fiscal crises. Fiscal policy is usually procyclical around fiscal crises and the decline in economic growth is magnified if accompanied by a financial crisis.

Keywords: Fiscal crisis; Sovereign debt; Economic growth; Twin crises (search for similar items in EconPapers)
Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:88:y:2018:i:c:p:191-207

DOI: 10.1016/j.jimonfin.2018.08.001

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