The IMF Working Papers series is designed to make IMF staff research available to a wide audience. Almost 300 Working Papers are released each year, covering a wide range of theoretical and analytical topics, including balance of payments, monetary and fiscal issues, global liquidity, and national and international economic developments.
Santiago Acosta Ormaechea, Takuji Komatsuzaki, and Carolina Correa-Caro
INTERNATIONAL MONETARY FUND
We estimate the effects on growth of nine fiscal reform episodes in seven high-income countries
using the Synthetic Control Method. These episodes are selected using an indicator-based approach
applied to the evaluation of growth-friendly fiscal reforms during 1975-2010. We find that in reform
countries the annual growth rate of real GDP was on average about 1 percentage point above their
synthetic units 10 years after each respective reform. Moreover, countries which were initially less
developed seemed to experience a larger growth impact after their reforms. Results are broadly
robust to controlling for structural reforms on business regulation, financial market, labor market, and
legal and product markets, which may also affect growth. Our findings also suggest that inequality is
not affected by the growth-friendly fiscal reforms analyzed in this paper.