Fiscal Limits In Advanced Economies
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Fiscal Limits In Advanced Economies
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Author : Eric Michael Leeper
language : en
Publisher:
Release Date : 2011
Fiscal Limits In Advanced Economies written by Eric Michael Leeper and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2011 with Economics categories.
Abstract: Aging populations in advanced economies are placing ever-increasing demands on government spending in the form of old-age benefits. Economies that have promised substantially more benefits than they have made provision to finance are heading into a prolonged era of fiscal stress. Unresolved fiscal stress raises the possibility that the economies will hit their fiscal limits where taxes and spending no longer adjust to stabilize debt. In such economies, monetary policy may lose its ability to control inflation and influence the economy in the usual ways. The paper discusses models of fiscal limits and their implications and lays out a research agenda to integrate political economy and empirical considerations with general equilibrium models of monetary and fiscal interactions
Fiscal Limits In Advanced Economies
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Author : Eric M. Leeper
language : en
Publisher:
Release Date : 2011
Fiscal Limits In Advanced Economies written by Eric M. Leeper and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2011 with Developed countries categories.
Abstract: Aging populations in advanced economies are placing ever-increasing demands on government spending in the form of old-age benefits. Economies that have promised substantially more benefits than they have made provision to finance are heading into a prolonged era of fiscal stress. Unresolved fiscal stress raises the possibility that the economies will hit their fiscal limits where taxes and spending no longer adjust to stabilize debt. In such economies, monetary policy may lose its ability to control inflation and influence the economy in the usual ways. The paper discusses models of fiscal limits and their implications and lays out a research agenda to integrate political economy and empirical considerations with general equilibrium models of monetary and fiscal interactions
Interest Growth Differentials And Debt Limits In Advanced Economies
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Author : Philip Barrett
language : en
Publisher: International Monetary Fund
Release Date : 2018-04-06
Interest Growth Differentials And Debt Limits In Advanced Economies written by Philip Barrett and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2018-04-06 with Business & Economics categories.
Do persistently low nominal interest rates mean that governments can safely borrow more? To addresses this question, I extend the model of Ghosh et al. [2013] to allow for persistent stochastic changes in nominal interest and growth rates. The key model parameter is the long-run difference between nominal interest and growth rates; if negative, maximum sustainable debts (debt limits) are unbounded. I show how both VAR- and spectral-based methods produce negative point estimates of this long-run differential, but cannot reject positive values at standard significance levels. I calibrate the model to the UK using positive but statistically plausible average interest-growth differentials. This produces debt limits which increase by only around 5% GDP as interest rates fall after 2008. In contrast, only a tiny change in the long-run average interest-growth differential – from the 95th to the 97.5th percentile of the distribution – is required to move average debt limits by the same amount.
Fiscal Limits External Debt And Fiscal Policy In Developing Countries
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Author : Huixin Bi
language : en
Publisher: International Monetary Fund
Release Date : 2014-04-01
Fiscal Limits External Debt And Fiscal Policy In Developing Countries written by Huixin Bi and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2014-04-01 with Business & Economics categories.
This paper studies fiscal policy effects in developing countries with external debt and sovereign default risks. State-dependent distributions of fiscal limits are simulated based on macroeconomic uncertainty and fiscal policy specifications. The analysis shows that expected future revenue plays an important role in the low fiscal limits of developing countries, relative to those of developed countries. External debt carries additional risks since large devaluation of the real exchange rate can suddenly raise default probabilities. Consistent with majority views, fiscal consolidations are counterproductive in the short and medium runs. When an economy approaches its fiscal limits, government spending can be less expansionary than in a low-debt state. As more revenue is required to service debt in a high-debt state, higher tax rates raise the economic cost of increasing consumption, reducing the fiscal multiplier.
Fiscal Limits And Monetary Policy
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Author : Eric Michael Leeper
language : en
Publisher:
Release Date : 2013
Fiscal Limits And Monetary Policy written by Eric Michael Leeper and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2013 with Economics categories.
Every economy faces a "fiscal limit" that delivers the maximum government debt-GDP ratio that can be sustained without appreciable risk of default or higher inflation. But governments in advanced economies issue substantial nominal debt and nominal debt is a commitment to repay in nominal units. When such economies are approaching their fiscal limits, debt can be devalued through higher current and future inflation rates. The paper develops a simple bond market supply-demand apparatus to explain how fiscal policy can be a source of inflation, while monetary policy merely determines the timing of inflation.
Reassessing The Role And Modalities Of Fiscal Policy In Advanced Economies
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Author : International Monetary Fund. Fiscal Affairs Dept.
language : en
Publisher: International Monetary Fund
Release Date : 2013-06-21
Reassessing The Role And Modalities Of Fiscal Policy In Advanced Economies written by International Monetary Fund. Fiscal Affairs Dept. and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2013-06-21 with Business & Economics categories.
This paper investigates how developments during and after the 2008–09 crisis have changed economists’ and policymakers’ views on: (i) fiscal risks and fiscal sustainability; (ii) the effectiveness of fiscal policy as a countercyclical tool; (iii) the appropriate design of fiscal adjustment programs; and (iv) the role of fiscal institutions.
Debt Limits And The Structure Of Public Debt
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Author : Alex Pienkowski
language : en
Publisher: International Monetary Fund
Release Date : 2017-05-22
Debt Limits And The Structure Of Public Debt written by Alex Pienkowski and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2017-05-22 with Business & Economics categories.
This paper provides a tractable framework to assess how the structure of debt instruments—specifically by currency denomination and indexation to GDP—can raise the debt limit of a sovereign. By calibrating the model to different country fundamentals, it is clear that there is no one-size-fits-all approach to optimal instrument design. For instance, low income countries may find benefit in issuing local currency debt; while in advanced economies debt tolerance can be substantially enhanced through issuing GDP-linked bonds. By looking at the marginal impact of these instruments, the paper also provides insight into the optimal portfolio compostion.
Fiscal Fatigue Fiscal Space And Debt Sustainability In Advanced Economies
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Author : Atish R. Ghosh
language : en
Publisher:
Release Date : 2011
Fiscal Fatigue Fiscal Space And Debt Sustainability In Advanced Economies written by Atish R. Ghosh and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2011 with Economics categories.
Abstract: How high can public debt rise without compromising fiscal solvency? We answer this question using a stochastic ability-to-pay model of sovereign default in which risk-neutral investors lend to a government that displays â??fiscal fatigue, â?? because its ability to increase primary balances cannot keep pace with rising debt. As a result, the government faces an endogenous debt limit beyond which debt cannot be rolled-over. Using data for 23 advanced economies over 1970â??2007, we find evidence of a fiscal reaction function with these features, and use it to compute â??fiscal space, â?? defined as the difference between projected debt ratios and debt limits
Fiscal Policy And Employment In Advanced And Emerging Economies
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Author : International Monetary Fund. Fiscal Affairs Dept.
language : en
Publisher: International Monetary Fund
Release Date : 2012-06-15
Fiscal Policy And Employment In Advanced And Emerging Economies written by International Monetary Fund. Fiscal Affairs Dept. and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2012-06-15 with Business & Economics categories.
This paper discusses tax and expenditure policy reforms to raise employment. Using data for 58 advanced and emerging economies, the paper provides a unified assessment of tax and expenditure measures that have usually been addressed separately. The focus is on incentives to increase labor demand and supply rather than on the impact of fiscal policy on employment through aggregate demand effects. It also discusses policies to improve the matching of labor supply and demand, and the principles which should guide the design of country-specific fiscal reforms to boost employment. A comprehensive set of tables on fiscal policies and labor market outturns for advanced and emerging economies is provided, permitting cross-country comparisons to facilitate the design of reform strategies.
Fiscal Rules And Fiscal Councils Recent Trends And Performance During The Covid 19 Pandemic
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Author : Mr. Hamid R Davoodi
language : en
Publisher: International Monetary Fund
Release Date : 2022-01-27
Fiscal Rules And Fiscal Councils Recent Trends And Performance During The Covid 19 Pandemic written by Mr. Hamid R Davoodi and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2022-01-27 with Business & Economics categories.
Adoption of fiscal rules and fiscal councils continued to increase globally over the last decades based on two new global datasets. During the pandemic, fiscal frameworks were put to test. The widespread use of escape clauses was one of the novelties in this crisis, which helped provide policy room to respond to the health crisis. But the unprecedented fiscal actions have led to large and widespread deviations from deficit and debt limits. The evidence shows that fiscal rules, in general, have been flexible during crises but have not prevented a large and persistent buildup of debt over time. Experience shows that deviations from debt limits are very difficult to reverse. The paper also presents evidence on the benefits of a good track record in abiding by the rules. All these highlight the difficult policy choices ahead and need to further improve rules-based fiscal frameworks.