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

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CPB Netherlands Bureau Comments on IMF Working Paper Fiscal Crises

  • 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?