Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/252135 
Year of Publication: 
2022
Series/Report no.: 
CESifo Working Paper No. 9618
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
We assess the specific need (or its absence) of a country to implement a fiscal consolidation programme by focusing specifically on their degree of success, notably in terms of fiscal sustainability. The "need" to consolidate is based on having a primary balance above or below the debt-stabilizing primary balance (provided by the IMF's Debt Sustainability Analysis) for each country. We then link the need for and the actual (historical) existence of fiscal adjustments to their sustainability impact. Looking at a large sample of developed and developing economics over the period 1980-2018, we find that, on average, there is a higher need of consolidations in advanced economies than in developing economies. In addition, the implementation of a fiscal consolidation program implies an improvement in the degree of public finances´ sustainability, for in advanced and developing economies. Finally, fiscal sustainability deteriorates when the need to implement a fiscal retrenchment arises.
Subjects: 
fiscal consolidation
cyclically-adjusted primary balance
sustainability
panel data
time-varying
JEL: 
C23
E21
E62
H50
H62
Document Type: 
Working Paper
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