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When do we repair the roof? Insights from responses to fiscal crisis early warning signals

Author

Listed:
  • Jiro Honda
  • René Tapsoba
  • Ismael Issifou

Abstract

Should policymakers wait for fiscal crisis early warning signals before repairing the roof? We answer this question by investigating the interlinkages between early warning signals for fiscal crises, policy responses, and policy outcomes, using a broad panel of 119 countries. We find that fiscal adjustment is a good remedy for countries that act proactively, reducing their likelihood of facing fiscal crisis by up to 60 percent. These findings highlight the prominence of strengthening institutions towards further incentivizing policymakers to repair the roof when the sun is shining.

Suggested Citation

  • Jiro Honda & René Tapsoba & Ismael Issifou, 2022. "When do we repair the roof? Insights from responses to fiscal crisis early warning signals," International Economics, CEPII research center, issue 172, pages 349-367.
    • Handle: RePEc:cii:cepiie:2022-q3-172-25
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    File URL: https://www.sciencedirect.com/science/article/pii/S2110701722000166
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    Cited by:

    1. Ryota Nakatani, 2023. "Sovereign Debt Crisis and Fiscal Devolution," JRFM, MDPI, vol. 17(1), pages 1-9, December.

    More about this item

    Keywords

    Early warning signal; Fiscal consolidation; Fiscal crisis;
    All these keywords.

    JEL classification:

    • H68 - Public Economics - - National Budget, Deficit, and Debt - - - Forecasts of Budgets, Deficits, and Debt
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus

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