The Sources of Fiscal Fluctuations

66 Pages Posted: 5 Jan 2021

See all articles by Antoine Levy

Antoine Levy

International Monetary Fund (IMF)

Luca A. Ricci

International Monetary Fund (IMF) - Research Department

Alejandro M. Werner

International Monetary Fund (IMF)

Multiple version iconThere are 2 versions of this paper

Date Written: October 2020

Abstract

This paper assesses the dynamic impact of global macroeconomic conditions, commodity price movements, shifts in portfolio preferences, and domestic shocks on fiscal outcomes-notably the budget deficit, its main components, and debt-across a wide range of countries. Heterogeneity is investigated across the level of development and other structural characteristics. Dynamics are explored via panel local projections, while robustness is assessed via dynamic panel and system GMM regressions. World growth, financial risk appetite, political events, and commodity export prices are key determinants of fiscal outcomes in EM, while domestic growth, commodity import prices, and banking crises appear to matter more in AE. Our estimates help quantify the amount of fiscal risk generated by various factors, and thus provide inputs for the design of potential insurance mechanisms or state-contingent debt instruments that could assist in smoothing fiscal fluctuations.

JEL Classification: E62, F41, H60, H87, Q02, H50, H63

Suggested Citation

Levy, Antoine and Ricci, Luca Antonio and Werner, Alejandro M., The Sources of Fiscal Fluctuations (October 2020). IMF Working Paper No. 20/220, Available at SSRN: https://ssrn.com/abstract=3758053

Antoine Levy (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Luca Antonio Ricci

International Monetary Fund (IMF) - Research Department ( email )

700 19th Street NW
Washington, DC 20431
United States
202-623-6007 (Phone)
202-623-4072 (Fax)

Alejandro M. Werner

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

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