Front-Loaded or Back-Loaded Fiscal Adjustments: What Works in Emerging Market Economies?

25 Pages Posted: 15 Feb 2006

See all articles by Emanuele Baldacci

Emanuele Baldacci

International Monetary Fund (IMF) - Fiscal Affairs Department

Benedict Clements

International Monetary Fund (IMF) - African Department

Sanjeev Gupta

International Monetary Fund (IMF) - Fiscal Affairs Department

Date Written: August 2004

Abstract

This paper investigates the political and economic determinants of successful fiscal adjustment in 25 emerging market economies from 1980 to 2001. The results show that large and back-loaded fiscal adjustments have the highest likelihood of success. Fiscal consolidations based on expenditure cuts increase the probability of approaching and achieving fiscal sustainability but are insufficient to maintain it unless accompanied by revenue reforms. Adjustment episodes launched in countries where governments enjoy a parliamentary majority and do not face imminent elections, are found to be more successful. Fiscal consolidations undertaken under IMF-supported programs also have a higher probability of success.

Keywords: Fiscal adjustment, fiscal consolidations, emerging markets, political economy

JEL Classification: C41, H30

Suggested Citation

Baldacci, Emanuele and Clements, Benedict and Gupta, Sanjeev, Front-Loaded or Back-Loaded Fiscal Adjustments: What Works in Emerging Market Economies? (August 2004). IMF Working Paper No. 04/157, Available at SSRN: https://ssrn.com/abstract=878982

Emanuele Baldacci (Contact Author)

International Monetary Fund (IMF) - Fiscal Affairs Department ( email )

700 19th Street, NW
Washington, DC 20431
United States

Benedict Clements

International Monetary Fund (IMF) - African Department ( email )

1700 19th Street, NW
Washington, DC 20431
United States

Sanjeev Gupta

International Monetary Fund (IMF) - Fiscal Affairs Department ( email )

700 19th Street, NW
Washington, DC 20431
United States

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