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Fiscal Consolidation in Israel: A Global Fiscal Model Perspective
Author:
Mr. Natan P. Epstein
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Mr. Selim A Elekdag
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https://orcid.org/0000-0002-1234-4463
, and
Ms. Marialuz Moreno Badia
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Series:
IMF Working Papers
Volume/Issue:
Volume 2006: Issue 253
Language:
English
Publication Date:
01 Nov 2006
DOI:
https://doi.org/10.5089/9781451865134.001
ISBN:
9781451865134
ISSN:
1018-5941
Pages:
31
Keywords:
WP; real GDP; real interest rate
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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Fiscal consolidation has become an important policy prescription for many emerging market countries (EMCs), particularly for the highly indebted ones. Although prudent fiscal policies tend to reduce vulnerabilities, their implementation is usually postponed. This paper represents, to the best of our knowledge, one of the first attempts in the literature to quantify the costs of delaying fiscal consolidation in an EMC. In particular, using the IMF's Global Fiscal Model (GFM), we find that early consolidation through expenditure cuts would result in a substantial increase in Israel's long-term output growth relative to the case with delayed fiscal adjustment. Using an alternative fiscal instrument, we find that delaying tax cuts would result in cumulative real GDP that is much larger than otherwise.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund