A Cross-Country Database of Fiscal Space

Abstract

This paper presents a comprehensive crosscountry database of …scal space, broadly de…ned as the availability of budgetary resources for a government to service its …nancial obligations. The database covers up to 200 countries over the period 1990-2016, and includes 28 indicators of …scal space grouped into four categories: debt sustainability, balance sheet vulnerability, external and private sector debt related risks as potential causes of contingent liabilities, and market access. We illustrate potential applications of the database by analyzing developments in …scal space across three time frames: over the past quarter century; during …nancial crises; and during oil price plunges. The main results are as follows. First, …scal space had improved in many countries before the global …nancial crisis. In advanced economies, following severe deteriorations during the crisis, many indicators of …scal space have virtually returned to levels in the mid-2000s. In contrast, …scal space has shrunk in many emerging market and developing economies since the crisis. Second, …nancial crises tend to coincide with deterioration in multiple indicators of …scal space, but they are often followed by reduced reliance on short-term borrowing. Finally, …scal space narrows in energy-exporting emerging market and developing economies during oil price plunges but later expands, often because of procyclical …scal tightening and, in some episodes, a recovery in oil prices.

Why do fiscal multipliers depend on fiscal Positions?

“…We obtain quarterly real private consumption and private investment series from the OECD, Haver Analytics, and Eurostat. CDS spreads are in basis points and taken from Kose et al (2017). We draw the conditioning variable (government debt as percentage of GDP) from the IMF-WEO database.…”

“…During the Great Recession of 2008-09, many countries deployed fiscal policy to support activity. As a result, government debt increased in a number of countries, and it remains elevated (Kose et al, 2017). There is mounting empirical evidence that weak fiscal positions erode the effectiveness of fiscal policy in stimulating the economy, although the channels through which this mechanism operates have not yet been systematically explored.…”

Fiscal Vulnerabilities in Commodity Exporting Countries and the Role of Fiscal Policy

“…• Public debt and external buffers. Debt levels and external buffers influence the country's default risk premia and its ability to borrow without threatening debt sustainability (e.g., Cuadra, Sanchez, and Sapriza (2010), IMF (2015, 2016a), Kose et al (2017)) and withstand negative shocks. Addressing these concerns, two stock variables are added to , : (i) government debt-to GDP ratio provided by World Economic Outlook, and (ii) foreign currency reserves in terms of monthly imports, provided by the World Development Indicators.…”

Inclusive Green Growth Index:

“…The fiscal positions of most Asian countries worsened after the 2008 global financial crisis and have not recovered to precrisis levels (Kose et al 2017); this poses difficulties in making fiscal adjustments. Most of the region's low-and middle-income countries do not adequately tap their tax bases for income, profits, assets, and capital gains, focusing instead on taxing sales of goods and services to drive government revenue.…”