Debt Reduction, Fiscal Adjustment, and Growth in Credit-Constrained Economies PDF Download

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Debt Reduction, Fiscal Adjustment, and Growth in Credit-Constrained Economies

Debt Reduction, Fiscal Adjustment, and Growth in Credit-Constrained Economies PDF Author: Mr.Emanuele Baldacci
Publisher: International Monetary Fund
ISBN: 147552076X
Category : Business & Economics
Languages : en
Pages : 37

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Book Description
This paper assesses the effects of fiscal consolidations associated with public debt reduction on medium-term output growth during periods of private debt deleveraging. The analysis covers 107 countries and 79 episodes of public debt reduction driven by discretionary fiscal adjustments during 1980–2012. It shows that expenditure-based, front-loaded fiscal adjustments can dampen growth when there are credit supply restrictions. Instead, fiscal adjustments that are gradual and rely on a mix of revenue and expenditure measures can support output expansion, while reducing public debt. In this context, protecting public investment is critical for medium-term growth, as is the implementation of supply-side, productivity-enhancing reforms.