Reassessing the fiscal mix for successful debt reduction

Baldacci, Emanuele; Gupta, Sanjeev; Mulas‐Granados, Carlos

doi:10.1111/j.1468-0327.2012.00287.x

Cited by 32 publications

(38 citation statements)

References 44 publications

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“…Indeed, the main goal of policy remained the reassurance of financial markets through "long-run debt sustainability." Revisionist studies (Cottarelli and Jaramillo 2012;Baldacci et al 2012) joined orthodox ones (Kumar and Woo 2011;Baldacci and Kumar 2010) in highlighting the negative effects on growth of debt levels over 60 percent of GDP, a much more demanding threshold than the 90 percent threshold proposed by the subsequently discredited study of Reinhart and Rogoff (2010). Therefore, the stimulus was deemed appropriate only for countries with low levels of debt and deficits 8 and with strong fiscal institutions.…”

Section: Staff Papers and The Fund's Doctrinementioning

confidence: 99%

“…Critically, tax rises were preferred to expenditure cuts due to the fact the latter improve both private sector expectations and competitiveness (Spilimbergo et al 2008; Guajardo et al 2012; Corsetti et al 2012;Baldacci et al 2010; Kand 2010; Cotarelli and Jaramillio 2012). Several studies suggested that increases in public investments (capital outlays) and cuts in the VAT are critical for growth while income tax cuts are not (Arslanalp et al 2011; Muir and Weber 2011;Baldacci et al 2012). Some papers go as far as arguing that government investments should be prioritized because they create public goods that depreciate at a slower rate than the private sector's stock (Baldacci et al 2012; Muir and Weber 2013).…”

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confidence: 99%

“…Several studies suggested that increases in public investments (capital outlays) and cuts in the VAT are critical for growth while income tax cuts are not (Arslanalp et al 2011;Muir and Weber 2011;Baldacci et al 2012). Some papers go as far as arguing that government investments should be prioritized because they create public goods that depreciate at a slower rate than the private sector's stock (Baldacci et al 2012;Muir and Weber 2013).…”

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confidence: 99%

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From Designers to Doctrinaires: Staff Research and Fiscal Policy Change at the IMF

Ban¹

2015

Research in the Sociology of Organizations

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Soon after the Lehman crisis, the International Monetary Fund surprised its critics with a reconsideration of its research and advice on fiscal policy. The paper traces the influence that the Fund's senior management and research elite has had on the recalibration of the IMF's doctrine on fiscal policy. The findings suggest and shows that overall there has been some selective incorporation of unorthodox ideas in the Fund's fiscal doctrine, while the strong thesis that austerity has expansionary effects has been rejected. Indeed, the Fund's new orthodoxy is concerned with the recessionary effects of fiscal consolidation and, more recently, endorses calls for a more progressive adjustment of the costs of fiscal sustainability. These changes notwithstanding, the IMF's adaptive incremental transformation on fiscal policy issues falls short of a paradigm shift and is best conceived of as an important recalibration of the pre-crisis status quo.and rejection of some elements of orthodoxy that this paper uncovers have been limited.Keywords: IMF, staff research, Keynesian, New Consensus macroeconomics, austerity From great expectations to modest recalibrationsIn 2008, many expected that the widespread outrage and economic hardship caused by the financial crisis would lead to the replacement of the neoliberal policy paradigm. The rediscovery of Keynesian macroeconomics in 2008Keynesian macroeconomics in -2009 by the leaders of the G20 seemed to indicate that change was imminent. Indeed, mainstream macroeconomic and finance economics seemed on their way to a historical trial. For a while, decades of debates over the details of the best version of the efficient market hypothesis and the most refined dynamic general stochastic equilibrium models seemed out of place.In the U.S., mythical figures of mainstream macroeconomists were dragged in front of the Congress to explain themselves, their apathy for lawmakers' concerns about unemployment exposed in full view.1 Allan Greenspan, the former chairman of the Fed and the guru of neoliberal practice offered a few public admissions of contrition over his beliefs. Financial Times editors called for the nationalization of large financial institutions and their transformation in public utilities. In Paris, Nicholas Sarkozy, a conservative president who campaigned on a neoliberal ticket the year before, allowed himself to be photographed leafing through a copy of Das Kapital. The world, it seemed, was ripe for a new economic model based on anything but more of the same neoliberal theory. If reality was of any empirical use, the case against mainstream economics was clear:[g]overning neoliberal ideas pretty much denied such a crisis could ever happen. So when it happened it was bound to open up some room for ideas that said such events were bound to happen if you left markets alone to regulate themselves, which is exactly the Keynesian point. Given this, it was hard to defend publicly the logic of self-correcting markets at a time when they were so obviously not self-correcting...

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Section: Staff Papers and The Fund's Doctrinementioning

confidence: 99%

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confidence: 99%

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From Designers to Doctrinaires: Staff Research and Fiscal Policy Change at the IMF

Ban¹

2015

Research in the Sociology of Organizations

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“…This can be accomplished in a number of ways. First, greater reliance on progressive revenue measures can obviate the need for large cuts in social transfers, although the extent to which adjustment can be achieved through revenue measures is limited if taxes are already high (Baldacci, Gupta and Mulas-Granados, 2012). Second, removing opportunities for tax avoidance and evasion, practices that typically disproprtionately benefit higher-income groups, can simultaneously improve both the efficiency and the distributional impact of the tax system, as can a greater reliance on progressive wealth and property taxes than is currently the case (Norregaard, forthcoming).…”

Section: A Advanced Economiesmentioning

confidence: 99%

Income Inequality and Fiscal Policy

Coady

Gupta²

2012

Staff Discussion Notes

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“…Broadening the scope of spending cuts to reducing subsidies, military spending, and public sector wages can reduce the need for cuts in social transfers. Greater reliance on progressive revenue measures can also avoid the need for large cuts in social transfers, though this room may be limited if taxes are already high (Baldacci, Gupta, and Mulas-Granados, 2012). Progressive tax measures could also be considered, such as reductions in regressive tax expenditures and greater taxation of wealth and property.…”

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confidence: 99%

Fiscal Policy and Income Inequality

2014

Policy Papers

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Reassessing the fiscal mix for successful debt reduction

Cited by 32 publications

References 44 publications

From Designers to Doctrinaires: Staff Research and Fiscal Policy Change at the IMF

From Designers to Doctrinaires: Staff Research and Fiscal Policy Change at the IMF

Income Inequality and Fiscal Policy

Fiscal Policy and Income Inequality

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