This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.In a number of oil producing countries, oil revenue accounts for the majority of government revenue, but is expected to be depleted in a relatively short time frame. Ensuring that fiscal policy is on a sustainable path is thus a high priority, but political and social adjustment costs create incentives to delay fiscal consolidation. This paper estimates how the permanently sustainable non-oil primary deficit (PSNOPD) depends on the speed of consolidation, using an optimization model with habit formation. Realism is added by allowing for negative growth-adjusted interest rates during a temporary period of catch-up growth. Applied to the Republic of Congo, this approach leads to the following conclusions: (i) the current fiscalpolicy stance is unsustainable; (ii) social adjustment costs justify spreading the bulk of the adjustment over five years; and (iii) the slower the adjustment, the lower the PSNOPD level. JEL Classification Numbers: E6, H5, Q3
This paper analyzes large fiscal adjustment plans, defined on the basis of the envisaged reduction in the public debt or deficit, and it compares ex ante plans with ex post outcomes. The motivation for this novel approach is two-fold. First, useful lessons can be drawn not only from successes, but also from failures to meet policy objectives. Second, by taking into account whether observed outcomes stemmed from intended policies or unexpected developments, this paper sheds new light on some of the findings obtained by studies that had relied on a purely ex post approach. The evidence is based on in-depth individual country case studies for each of the G7 countries and on a systematic, crosscountry statistical analysis of all fiscal adjustment plans presented by all European Union countries during the past two decades.
This paper analyzes recent fiscal policies of nonrenewable resource exporting countries in Latin America and the Caribbean in the context of sharp swings in resource prices. Fiscal policies were predominantly procyclical during the boom period 2003-08 but to significantly differing degrees within the sample. Countries that pursued more conservative fiscal policies during the boom were then able to implement countercyclical fiscal policies during the downturn; moreover, they reduced or maintained their fiscal vulnerability to resource shocks, while their long-term fiscal sustainability positions improved or were broadly unchanged. However, these dimensions of fiscal policy did not seem to be linked to fiscal rules or resource funds, as countries with such institutions displayed a broad range of fiscal responses to the recent cycle.
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