Big Government, High Debt, and Fiscal Adjustment in Small States
Electronic Access:
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Summary:
Using a new fiscal dataset for small states, this paper analyzes the link between country size, government size, debt, and economic performance. It finds that on average small states have larger governments and higher public debt. Although there are intrinsic factors that explain why governments are bigger in small states, those with smaller governments and lower public debt tend to grow faster and are less vulnerable. Large fiscal adjustments, primarily through expenditure restraint, can underpin growth, although sometimes other elements can also impact. Since better governance is associated with lower debt, fiscal adjustment should be supported by governance improvements.
Series:
Working Paper No. 2008/039
Subject:
Exchange rate arrangements Expenditure External debt Fiscal consolidation Public debt
Frequency:
Biannually
English
Publication Date:
February 1, 2008
ISBN/ISSN:
9781451869019/1018-5941
Stock No:
WPIEA2008039
Pages:
45
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