1.
CPB Netherlands Bureau for Economic Policy Analysis
IMF Working Paper
Fiscal Crises
(WP/17/86)
Comments by Eugene Verkade
ADEMU workshop
Bonn , July 6 2017

2.
CPB Netherlands Bureau for Economic Policy Analysis
Comments on Working Paper
General remarks
Remarks on results
Policy implications

3.
CPB Netherlands Bureau for Economic Policy Analysis
General remarks
• Tremendous work !
• Interesting large database:
• 188 countries x 46 years  8700 observations
• 436 crises x 6 years  2600 crises years (30% fiscal crises years!)
• 4 type of crises (Baldacci)
• 2/3 credit events, 1/5 official financing
• other 15% more severe crises?
• 4 country groups (AM,EM,LIDC,SDS)
• Functional, however countries shift between group
• 45 year period
• countries have changed, the world has changed (countries have become more integrated)

4.
CPB Netherlands Bureau for Economic Policy Analysis
Results
• A. Dynamics around fiscal crises :
– Group averages , comprehensible results
› largest gdp impact in AM (1&2 year), less in EM (exchange rate), lesser in LIDC
› inflation rate in AM?
– more to do with type of crisis then country group?
– homogenous groups ? , large/small countries
– spread over effects, isolated crises?
• B. Twin crises
– amplification effect
– Combining two databases
• C. Long term growth impact?
– Lower growth rate/growth level after crises?
– however : just lower growth because of structural changes?

5.
CPB Netherlands Bureau for Economic Policy Analysis
Policy implications :
• ‘’Crises are accompanied by disruptive fiscal adjustments’’
– Self sustaining? , avoidable?
• ‘’Public debt tends to rise in the first three years’’
– (temporary) denominator effect of decelerating growth
• Have countries become better prepared or more vulnerable?
• Are gdp bonds or Eurobonds a good idea?
• Underlying mechanisms
– warning signals
– Countries differ (also in the EU)
– what can they learn from each other?