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An Empirical Analysis of Fiscal Adjustments

C. John McDermott
Reserve Bank of New Zealand

Robert Wescott
International Monetary Fund (IMF) - European Department

June 1996

IMF Working Paper No. 96/59

Abstract:
This study uses the fiscal expansion and consolidation experiences of the industrial countries over the period 1970 to 1995 to examine the interplay between fiscal adjustments and economic performance. A key finding is that fiscal consolidation need not trigger an economic slowdown. Fiscal consolidation that concentrates on the expenditure side, and especially on transfers and government wages, is more likely to succeed in reducing the public debt ratio than tax-based consolidation. Also, the greater the magnitude of the fiscal consolidation, the more likely it is to succeed in reducing the debt ratio.

JEL Classifications: E62, H62

Working Paper Series

Date posted: February 15, 2006 ; Last revised: February 15, 2006

Suggested Citation

McDermott, C. John and Wescott, Robert, An Empirical Analysis of Fiscal Adjustments (June 1996). IMF Working Paper, Vol. , pp. 1-26, 1996. Available at SSRN: http://ssrn.com/abstract=882959

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Contact Information

C. John McDermott (Contact Author) Reserve Bank of New Zealand ( email ) 2 The Terrace P.O. Box 2498 Wellington New Zealand
Robert Wescott International Monetary Fund (IMF) - European Department ( email ) 700 19th St. NW Washington, DC 20431 United States