Public Sector Balance Sheet Strength and the Macro Economy

August 6, 2019

Preview Citation

Format: Chicago

Reza Yousefi. Public Sector Balance Sheet Strength and the Macro Economy, (USA: International Monetary Fund, 2019) accessed November 21, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

This paper introduces concepts of public sector balance sheet (PSBS) strength, taking into account different aspects of what governments own in addition to what they owe. It develops measures of PSBS strength and investigates their macroeconomic implications. Empirical estimations show that in their pricing of sovereign bonds, financial markets account for government assets and net worth in addition to their liabilities. Furthermore, economies with stronger public sector balance sheets experience shallower recessions and recover faster in the aftermath of economic downturns. This faster return to growth can be explained by the greater space for countercyclical fiscal policy in countries with stronger balance sheets.

Subject: Bond yields, Financial institutions, Financial services, Financial statements, Public debt, Public financial management (PFM), Public sector, Sovereign bonds, Yield curve

Keywords: Balance sheet, Balance sheet data, Balance sheet indicator, Balance sheet measure, Balance sheet strength, Balance sheet strength measure, Balance sheet variable, Bond yields, Debt, Financial statements, Fiscal policy, Government balance sheets, Net financial worth, Net worth, Public sector balance sheet, Sovereign bonds, WP, Yield curve

Publication Details

Pages:

27
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2019/170
Stock No:

WPIEA2019170
ISBN:

9781513508955
ISSN:

1018-5941

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