IDEAS home Printed from https://ideas.repec.org/p/imf/imfwpa/2017-039.html
   My bibliography  Save this paper

Governments and Promised Fiscal Consolidations: Do They Mean What They Say?

Author

Listed:
  • Mr. Sanjeev Gupta
  • João Tovar Jalles
  • Mr. Carlos Mulas-Granados
  • Michela Schena

Abstract

This paper analyses the causes and consequences of fiscal consolidation promise gaps, defined as the distance between planned fiscal adjustments and actual consolidations. Using 74 consolidation episodes derived from the narrative approach in 17 advanced economies during 1978 – 2015, the paper shows that promise gaps were sizeable (about 0.3 percent of GDP per year, or 1.1 percent of GDP during an average fiscal adjustment episode). Both economic and political factors explain the gaps: for example, greater electoral proximity, stronger political cohesion and higher accountability were all associated with smaller promise gaps. Finally, governments which delivered on their fiscal consolidation plans were rewarded by financial markets and not penalized by voters.

Suggested Citation

  • Mr. Sanjeev Gupta & João Tovar Jalles & Mr. Carlos Mulas-Granados & Michela Schena, 2017. "Governments and Promised Fiscal Consolidations: Do They Mean What They Say?," IMF Working Papers 2017/039, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2017/039
    as

    Download full text from publisher

    File URL: http://www.imf.org/external/pubs/cat/longres.aspx?sk=44690
    Download Restriction: no
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Beetsma, Roel & Debrun, Xavier & Sloof, Randolph, 2022. "The political economy of fiscal transparency and independent fiscal councils," European Economic Review, Elsevier, vol. 145(C).
    2. Stoian, Andreea & Iorgulescu, Filip, 2020. "Fiscal policy and stock market efficiency: An ARDL Bounds Testing approach," Economic Modelling, Elsevier, vol. 90(C), pages 406-416.
    3. Michael Anthony Adams, 2020. "Fiscal Policy and Stock Market Efficiency in the USA: An ARDL Bounds Testing Approach," Journal of Accounting, Business and Finance Research, Scientific Publishing Institute, vol. 9(2), pages 73-81.
    4. Philipp Heimberger, 2020. "The dynamic effects of fiscal consolidation episodes on income inequality: evidence for 17 OECD countries over 1978–2013," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 47(1), pages 53-81, February.
    5. Eichler, Stefan & Plaga, Timo, 2020. "The economic record of the government and sovereign bond and stock returns around national elections," Journal of Banking & Finance, Elsevier, vol. 118(C).
    6. Ciminelli, Gabriele & Ernst, Ekkehard & Merola, Rossana & Giuliodori, Massimo, 2019. "The composition effects of tax-based consolidation on income inequality," European Journal of Political Economy, Elsevier, vol. 57(C), pages 107-124.
    7. António Afonso & Frederico Silva Leal, 2022. "Fiscal episodes in the Economic and Monetary Union: Elasticities and non‐Keynesian effects," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(1), pages 571-593, January.
    8. Wiese, Rasmus & Jong-A-Pin, Richard & de Haan, Jakob, 2018. "Can successful fiscal adjustments only be achieved by spending cuts?," European Journal of Political Economy, Elsevier, vol. 54(C), pages 145-166.
    9. Huidrom, Raju & Kose, M. Ayhan & Lim, Jamus J. & Ohnsorge, Franziska L., 2020. "Why do fiscal multipliers depend on fiscal Positions?," Journal of Monetary Economics, Elsevier, vol. 114(C), pages 109-125.
    10. Beetsma, Roel & Furtuna, Oana & Giuliodori, Massimo & Mumtaz, Haroon, 2021. "Revenue- versus spending-based fiscal consolidation announcements: Multipliers and follow-up," Journal of International Economics, Elsevier, vol. 131(C).
    11. Philipp Heimberger, 2018. "The Dynamic Effects of Fiscal Consolidation Episodes on Income Inequality," wiiw Working Papers 147, The Vienna Institute for International Economic Studies, wiiw.
    12. Beetsma, Roel & Furtuna, Oana & Giuliodori, Massimo & Mumtaz, Haroon, 2017. "Revenue- versus spending-based fiscal consolidation announcements: follow-up, multipliers and confidence," CEPR Discussion Papers 12133, C.E.P.R. Discussion Papers.
    13. Beetsma, Roel & Furtuna, Oana & Giuliodori, Massimo, 2018. "Revenue- versus spending-based consolidation plans: the role of follow-up," Working Paper Series 2178, European Central Bank.
    14. World Bank Group, 2017. "Kenya Economic Update, December 2017," World Bank Publications - Reports 29033, The World Bank Group.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:imf:imfwpa:2017/039. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Akshay Modi (email available below). General contact details of provider: https://edirc.repec.org/data/imfffus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.