Chipping away at public debt : sources of failure and keys to success in fiscal adjustment

306 Pages·2011·2.01 MB·English

by  Mauro

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Chipping Away at Public Debt
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Chipping Away at Public Debt
Sources of Failure and Keys to
Success in Fiscal Adjustment
EDITED BY
PAOLO MAURO
JohnWiley&Sons,Inc.
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Copyright#2011byTheInternationalMonetaryFund.Allrightsreserved.
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LibraryofCongressCataloging-in-PublicationData
Chippingawayatpublicdebt:sourcesoffailureandkeystosuccessinfiscaladjustment/
editedbyPaoloMauro.
p.cm.
Includesindex.
ISBN978-1-118-04338-7(hardback)
ISBN978-1-118-11304-2(ebk);
ISBN978-1-118-11305-9(ebk);
ISBN978-1-118-11306-6(ebk)
PrintedintheUnitedStates
1. Debts,Public. 2. Fiscalpolicy. 3. Budgetdeficits. 4. Governmentspending
policy. I. Mauro,Paolo.
HJ8015.C472011
336.30435–dc22 2011014255
PrintedintheUnitedStatesofAmerica
10 9 8 7 6 5 4 3 2 1
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Contents
Foreword ix
Acknowledgments xi
Introduction xiii
CHAPTER1 Canada:ASuccessStory 1
CemileSancak,LucyQianLiu,andTaisukeNakata
Introduction 1
Background 2
PlansversusOutcomes:MacroeconomicFactors 7
NatureandCompositionofAdjustment 13
StructuralReforms 21
ExtenttowhichAdjustmentsWereSustained 23
Conclusion 25
Notes 27
CHAPTER2 UnitedStates:TheQuestforFiscalDiscipline 31
JiriJonas
Introduction 31
FirstAttempt:BalancedBudgetandEmergency
DeficitControlAct1985 33
SecondAttempt:OmnibusBudget
ReconciliationActof1990 36
ThirdAttempt:OmnibusBudgetReconciliation
Actof1993 38
ActualversusProjectedFiscalPerformanceunder
OmnibusBudgetReconciliationActof1993 42
1990sDeficitReduction:GoodPolicyorGoodLuck? 44
EasyWon,EasyLost? 50
Conclusion 52
Notes 54
v
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vi Contents
CHAPTER3 France:VirtueandFortune 57
EdouardMartin,IrinaTytell,andIrinaYakadina
Introduction:FactorsUnderlyingtheNeedforFiscal
Consolidation 57
EarlyAttemptsatFiscalAdjustment 61
AFirstAttemptatMedium-TermFiscalConsolidation,
1994–97 64
AMoreSystematicApproachtoMedium-Term
Budgeting:ConsolidationExperiencesundertheStability
andGrowthPact 72
Conclusion 81
Notes 82
CHAPTER4 Germany:FiscalAdjustmentAttemptsWith
andWithoutReforms 85
ChristianBreuer,Jan Gottschalk,andAnna Ivanova
Introduction 85
1975–79ConsolidationAttempt 88
1981–85ConsolidationAttempt 93
1991–95ConsolidationAttempt 99
2003–07ConsolidationAttempt 105
Lessons 110
Notes 112
CHAPTER5 UnitedKingdom:FourChancellorsFacingChallenges 115
ToniAhnert,RichardHughes,andKeikoTakahashi
Introduction 115
SelectionofConsolidationPlans 116
Background,Content,andPerformanceoftheFour
AdjustmentPlans 117
DeterminantsofSuccessandFailure 125
LessonsfromSuccessandFailure 138
Appendix5A.UnitedKingdom:FiscalAdjustment
PlansandOutturns 140
Notes 150
CHAPTER6 Italy:Medium-TermFiscalPlanningunderFrequent
GovernmentChanges 153
FabrizioBalassone,SandroMomigliano,andPietro Rizza
Introduction 153
ABriefHistoryofItaly’sFiscalPlanningFramework 155
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Contents vii
Short-TermOriginsofMedium-TermFailures 157
ANarrativeofDesignandPerformanceofPre-and
Post-EuropeanMonetaryUnitPlans 162
ImplementingPlansfortheYearAhead 165
TwoImportantPlansAnalyzedinDetail 167
Conclusion 172
Notes 174
CHAPTER7 Japan:FiscalAdjustmentPlansandMacroeconomic
Shocks 177
KeikoTakahashiandKiichiTokuoka
Introduction 177
The1997FiscalStructuralReformAct 178
Medium-TermFiscalAdjustmentPlans:FiscalYear2002
andtheFollowing 189
Conclusion 203
Appendix7A:TheBohnFiscalSustainabilityTest 206
Appendix7B:TimelineofMedium-TermFiscal
AdjustmentPlansinJapan 209
Notes 209
CHAPTER8 ThePerformanceofLargeFiscalAdjustmentPlansinthe
EuropeanUnion:ACross-CountryStatisticalAnalysis 213
S.AliAbbas,FuadHasanov,PaoloMauro,and
JunhyungPark
Introduction 213
Data,SampleSelection,andMethodology 216
DescriptiveAnalysis 219
RegressionAnalysis 232
Conclusion 241
Appendix8A:DataIssuesandCyclicalAdjustment 243
Appendix8B:TimelineforEuropeanMonetary
Integration(1990–2009) 245
Notes 246
CHAPTER9 Conclusion 249
KeyFindings:WhatFailedandWhatWorkedin
PastAttemptsatFiscalAdjustment 251
ImplicationsforPlannedAdjustments 255
Notes 258
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viii Contents
References 259
AbouttheProjectTeam 267
Index 271