Fiscal Anatomy of Two Crises and an Interlude

June 2, 2023

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Format: Chicago

Xuehui Han, Paolo Mauro, and John Ralyea. Fiscal Anatomy of Two Crises and an Interlude, (USA: International Monetary Fund, 2023) accessed December 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

The Global Financial Crisis (GFC) and the COVID-19 pandemic are associated with the largest increases in public debt ratios since World War II. We decompose unexpected changes in debt ratios into the role of surprises in economic growth, interest costs, policy measures, and other factors. During both crises, lower-than-expected output contributed the most to higher-than-expected debt ratios. Fiscal policy measures recorded in the public deficit were similar in the two episodes. We also analyze the decade-long interlude (2010-19). Rather than declining as foreseen in a normative scenario, debt ratios remained stable on average, as interest rates, policy adjustment and, in some countries, economic growth turned out lower than expected.

Subject: COVID-19, Financial crises, Fiscal policy, Global financial crisis of 2008-2009, Health, Inflation, Prices, Public debt

Keywords: COVID-19, Crisis Management, Debt development, Debt surprise, Decomposition of debt, Deficit, Fiscal policy measure, Forecasts, Global, Global financial crisis of 2008-2009, IMF working paper 2023/117, Inflation, Public debt

Publication Details

Pages:

25
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2023/117
Stock No:

WPIEA2023117
ISBN:

9798400242120
ISSN:

1018-5941

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