What sustains fiscal consolidations in emerging market countries?

Sanjeev Gupta, Emanuele Baldacci, Benedict Clements and Erwin R. Tiongson
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Sanjeev Gupta: International Monetary Fund, USA, Postal: International Monetary Fund, USA
Emanuele Baldacci: International Monetary Fund, USA, Postal: International Monetary Fund, USA
Benedict Clements: International Monetary Fund, USA, Postal: International Monetary Fund, USA
Erwin R. Tiongson: International Monetary Fund, USA, Postal: International Monetary Fund, USA

International Journal of Finance & Economics, 2005, vol. 10, issue 4, 307-321

Abstract: This paper examines the factors affecting the persistence of fiscal consolidation in 25 emerging market countries during 1980-2001. It proposes a new approach for defining spells of fiscal consolidation. The results indicate that the probability of ending a fiscal adjustment is affected by the legacy of previous fiscal failures, the size of the deficit, the composition of spending and level of total revenues. There is also some evidence that the initial debt stock, exchange rate developments, inflation and the unemployment rate have an impact on the persistence of adjustments. Copyright © 2005 John Wiley & Sons, Ltd.

Date: 2005
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DOI: 10.1002/ijfe.274

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