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In Search of Lost Revenue: Why Restoring Fiscal Soundness After a Crisis is Harder Than it Looks

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  • Masato Miyazaki

Abstract

This note argues that because fiscal deficit after a crisis owe much to a drop in tax revenues and a sluggish revenue growth, its adjustment has to rely more on revenue augmentation than commonly thought. Cutting extra spending in the wake of the crisis would not balance the book, while a natural growth of tax revenue after the recovery may take a long time before financing the pre-crisis level of expenditure. Faced with unpopular choices, the government may implicitly prefer seeing higher inflation.

Suggested Citation

  • Masato Miyazaki, 2010. "In Search of Lost Revenue: Why Restoring Fiscal Soundness After a Crisis is Harder Than it Looks," IMF Working Papers 2010/137, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2010/137
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    References listed on IDEAS

    as
    1. Masato Miyazaki, 2007. "Framework for Fiscal Consolidation: Successes and Failures in Japan," OECD Journal on Budgeting, OECD Publishing, vol. 6(4), pages 123-148.
    2. Carmen M. Reinhart & Kenneth S. Rogoff, 2014. "This Time is Different: A Panoramic View of Eight Centuries of Financial Crises," Annals of Economics and Finance, Society for AEF, vol. 15(2), pages 215-268, November.
    3. Carmen M. Reinhart & Kenneth S. Rogoff, 2009. "Varieties of Crises and Their Dates," Introductory Chapters, in: This Time Is Different: Eight Centuries of Financial Folly, Princeton University Press.
    4. Mr. Fabian Valencia & Mr. Luc Laeven, 2008. "Systemic Banking Crises: A New Database," IMF Working Papers 2008/224, International Monetary Fund.
    5. Alberto Alesina & Roberto Perotti, 1997. "Fiscal Adjustments in OECD Countries: Composition and Macroeconomic Effects," IMF Staff Papers, Palgrave Macmillan, vol. 44(2), pages 210-248, June.
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    Cited by:

    1. Irina BILAN & Florin OPREA, 2012. "EU fiscal consolidation strategies in times of crisis – comparative approaches," Anale. Seria Stiinte Economice. Timisoara, Faculty of Economics, Tibiscus University in Timisoara, vol. 0, pages 887-894, May.

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