Fiscal Adjustment in Transition: Evidence from the 1990s

Catriona Purfield

Emerging Markets Finance and Trade, 2003, vol. 39, issue 1, 43-62

Abstract: In the 1990s, transition countries underwent large fiscal adjustments to address the fiscal imbalances that existed at the start of the transition process. This paper examines whether the factors identified in the empirical literature on advanced economies, namely the size and composition of fiscal adjustments are also important in determining the success of fiscal adjustment in transition economies. The main findings are that larger consolidations were more successful in addressing the fiscal imbalances on a durable basis. There is evidence that policies that focused on expenditure were more successful in addressing the imbalances than those that relied on revenue increases. The paper finds little evidence of expansionary fiscal contractions, but fiscal contractions were not associated with a significantly negative impact on growth either. For those that attempted fiscal stimulus in the 1990s, few succeeded in boosting growth significantly above the average country-specific growth rate for the 1990s.

Keywords: fiscal adjustment; fiscal policy; logit regression; transition economies (search for similar items in EconPapers)
Date: 2003
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Citations: View citations in EconPapers (14)

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