Fiscal Consolidation and Public Debt

Sakai Ando, Prachi Mishra, Nikhil Patel, Adrian Peralta-Alva and Andrea Presbitero

No 18548, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: High public debt is urging policy makers to consider strategies to rebuild buffers and preserve debt sustainability. Using a large sample of advanced and emerging countries, we focus on fiscal consolidation, and evaluate whether—and under which conditions—fiscal consolidation is likely to be associated with a durable reduction in public debt to GDP ratios. Our findings indicate that, on average, fiscal consolidation has a minimal impact on debt ratios. However, consolidations implemented during economic upturns and in environments with high potential for crowding out effects are more likely to be associated with sustained reductions in debt ratios.

Keywords: Public debt; Fiscal consolidation (search for similar items in EconPapers)
Date: 2023-10
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