3 Persistence of Fiscal Adjustments and Expenditure Composition in Low-Income Countries
Author:
Emanuele Baldacci
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Language:
English
Print Publication Date:
17 Sep 2004
Keywords:
BOOK; country; user payment; per capita income; francophone country; recipient country; exchange rate; hazard function; Health care spending; Africa; Western Hemisphere; Sub-Saharan Africa; Global; Asia and Pacific; expenditure reduction; survival function; standard error; Gompertz function; likelihood ratio test statistics; Fiscal consolidation; Fiscal sustainability; Current spending; expenditure reallocation

Abstract

There is a consensus among researchers that fiscal consolidations need to persist if they are to have a positive effect on growth. In general, the persistence of high-quality fiscal adjustment can improve macroeconomic stability and reduce expectations that higher taxes and interest rates will be needed in the future to finance fiscal imbalances. Short-lived fiscal consolidations, on the other hand, can be harmful for growth, as they signal that the initial improvement in the fiscal budget cannot be maintained and could be reversed in the medium term. An understanding of what makes fiscal consolidations sustainable is therefore essential to unraveling how fiscal adjustment influences growth (von Hagen and Strauch, 2001).

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Cover Helping Countries Develop
Helping Countries Develop
The Role of Fiscal Policy
ISBN:
9781589063181
Publication Date:
17 Sep 2004
Publisher:
International Monetary Fund
DOI:
https://doi.org/10.5089/9781589063181.071
Pages:
540
Front Matter
1 Fiscal Policy for Economic Development: An Overview
I Macroeconomic Policy in Developing Countries
II Public Spending and the Millennium Development Goals
III Revenues and Growth
IV. Fiscal Policy and Aid
V. Special Topics

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