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What sustains fiscal consolidations in emerging market countries?
Author(s) -
Gupta Sanjeev,
Baldacci Emanuele,
Clements Benedict,
Tiongson Erwin R.
Publication year - 2005
Publication title -
international journal of finance and economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.505
H-Index - 39
eISSN - 1099-1158
pISSN - 1076-9307
DOI - 10.1002/ijfe.274
Subject(s) - economics , consolidation (business) , monetary economics , exchange rate , emerging markets , fiscal adjustment , revenue , debt , inflation (cosmology) , unemployment , fiscal policy , macroeconomics , stock market , finance , physics , theoretical physics , paleontology , horse , biology
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.