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Fiscal Sustainability in Heavily Indebted Countries Dependent
Fiscal Sustainability in Heavily Indebted Countries Dependent

... next five years and to be depleted over the next 30 years. At the same time, Gabon faces a heavy debt burden that will continue to absorb about 40 percent of government revenue during the remainder of the decade. In view of these trends, it is necessary to assess Gabon’s long-term fiscal sustainabil ...
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... deficit limit) can improve upon using only deficit limits. Surplus limits are never used in an optimal uncoordinated fiscal rule, as these limits force low government types which are overborrowing to borrow even more. However, surplus limits also serve to increase interest rates, and through this ch ...
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... improve. A permanent loss in potential output, weak private consumption, and much higher debt levels in the United States will be negative legacies of the crisis that could adversely affect the Latin America and Caribbean (LAC) region. The impact of the crisis on the LAC region was substantial, but ...
Free Full text
Free Full text

... imbalances. But extensive fiscal consolidation and internal devaluation have come with substantial costs for society, which contributed to delays in reform implementation and to policy reversals since the last Article IV Consultation, culminating in a renewed crisis of confidence in 2015. Since then ...
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... sovereign debt crisis in Europe surfaced. Systematically large prediction errors may due to mispricing of risk or may be attributable to expectations of a future decline in fundamentals. Our analysis may help address a number of questions. Was risk in many markets (e.g. PIIGS) “underpriced” during ...
the elusive recovery
the elusive recovery

... We identify two promising reform paths for the SGP: the golden rule of public finance and a modified expenditure rule. The golden rule is a traditional public finance concept that deducts net public investment from both the headline and the structural deficit, so that net public investment would be ...
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... Bank (see Ratha et al. 2008; World Bank 2009) and the IMF (2009) some of the effects of the credit crisis on poor developing countries are discussed. However, they are analyzed and discussed in a non-integrated manner. In this paper we provide a model of difference equations that integrates many of ...
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... (Roubini and Setser 2004; Manasse and Roubini 2009). In this type of crisis, because a government cannot pay its debt, the consensus is that cutting expenses is necessary to balance deficits in the short term. Still, the usefulness of monetary policy to address sovereign debt crises is more inconclu ...
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... Most current theories of the cross-country distribution of per-capita income imply that all countries share the same long-run growth rate (of TFP or per-capita GDP). Yet the historical record shows that growth rates can differ substantially across countries for long periods of time. For example, Prit ...
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Austerity

In economics, austerity is a set of policies with the aim of reducing government budget deficits. Austerity policies may include spending cuts, tax increases, or a mixture of both. Austerity may be undertaken to demonstrate the government's fiscal discipline to their creditors and credit rating agencies by bringing revenues closer to expenditures.In most macroeconomic models, austerity policies generally increase unemployment in the short run, as government spending falls reducing jobs in the public or private sector or both, while tax increases reduce household disposable income and thus consumption. The U.S. Congressional Budget Office illustrated this when comparing unemployment under alternative fiscal scenarios.Unemployment increases safety net spending and further reduces tax revenues, partially offsetting the austerity measures. Government spending contributes to gross domestic product (GDP), so reducing spending may result in a higher debt-to-GDP ratio, a key measure of the debt burden carried by a country and its citizens. Higher short-term deficit spending (stimulus) contributes to GDP growth particularly when consumers and businesses are unwilling or unable to spend. This is because crowding out (i.e., rising interest rates as government bids against business for a finite amount of savings, slowing the economy) is less of a factor in a downturn, as there may be a surplus of savings.In the aftermath of the Great Recession, austerity results in Europe have been as predicted by macroeconomics, with unemployment rising to record levels and debt-to-GDP ratios rising, despite reductions in budget deficits relative to GDP. Eurostat reported that unemployment in the 17 Euro area countries (EA17) reached record levels in March 2013, at 12.1%, up from 11.0% in March 2012 and 10.3% in March 2011; and that the overall debt-to-GDP ratio for the EA17 was 70.1% in 2008, 80.0% in 2009, 85.4% in 2010, 87.3% in 2011, and 90.6% in 2012. Further, real GDP in the EA17 declined for six straight quarters from Q4 2011 to Q1 2013. The U.S. Congressional Budget Office estimated in August 2012 that if the U.S. implemented moderate austerity measures, the unemployment rate would rise by over 1% and economic growth would be significantly reduced in 2013. The U.S. partially avoided the ""fiscal cliff"" through the American Taxpayer Relief Act of 2012. U.S. unemployment has fallen steadily from a peak of 10% in early 2010 to 5.3% by July 2015.
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