Challenges of Fiscal Policy in Emerging and Developing Economies

This paper presents a systematic analysis of the availability and use of fiscal space in emerging and developing economies. These economies built fiscal space in the run-up to the Great Recession of 2008-09, which was then used for stimulus. This reflects a more general trend over the past three decades, where availability of fiscal space has been associated with increasingly countercyclical (or less procyclical) fiscal policy. However, fiscal space has shrunk since the Great Recession and has not returned to pre-crisis levels. Emerging and developing economies face downside risks to growth and prospects of rising financing costs. In the event that these cause a sharp cyclical slowdown, policy makers may need to employ fiscal policy as a possible tool for stimulus. An important prerequisite for fiscal policy to be effective is that these economies have the necessary fiscal space to employ countercyclical policies. Over the medium-term, credible and well-designed institutional arrangements, such as fiscal rules, stabilization funds, and medium-term expenditure frameworks, can help build fiscal space and strengthen policy outcomes.

Bibliographic Details

Main Authors:	Huidrom, Raju, Kose, M. Ayhan, Ohnsorge, Franziska L.
Format:	Working Paper biblioteca
Language:	English en_US
Published:	World Bank, Washington, DC 2016-06
Subjects:	CURRENCY MISMATCHES, MONETARY POLICY, DEFICIT, WITHDRAWAL, DEBT ACCUMULATION, CAPITAL MARKETS, CONSUMPTION EXPENDITURES, HOLDING, OIL PRICE, LONG-TERM INTEREST, STOCK, MACROECONOMIC MANAGEMENT, INTEREST, GUARANTEES, GOVERNMENT SPENDING, EMERGING ECONOMIES, INTEREST RATE, PRIVATE CREDIT, OPTION, EXCHANGE, GOVERNMENT REVENUES, DEBT MANAGEMENT, LIQUIDITY, DEVELOPING COUNTRIES, REAL INTEREST, POLITICAL ECONOMY, EXPORTERS, REVENUES, PORTFOLIO, FISCAL POLICY, LIQUIDITY RISK, BONDS, MACROECONOMIC CONDITIONS, TAX, GOVERNMENT BOND, RESERVE, MARKET ACCESS, GOVERNMENT GUARANTEES, INTERNATIONAL BANK, PENSION, DEBT BURDEN, CREDIBILITY, FINANCIAL FRAGILITY, BUDGET, MARKET PARTICIPANTS, CENTRAL BANK, MATURITY, POLICY RESPONSE, FISCAL POLICIES, INSTITUTIONAL INVESTOR, OIL PRICES, INITIAL DEBT, GLOBAL ECONOMY, CURRENCY, INTEREST EXPENSE, DOMESTIC CURRENCY, EXCHANGE RATE MOVEMENTS, POLICY RESPONSES, FOREIGN CURRENCY DEBT, RESERVE BANK, BOND YIELD, GOVERNMENT BOND YIELD, PRICE VOLATILITY, CAPITAL FORMATION, EXCHANGE RATES, OPTIONS, INTEREST RATES, MONETARY FUND, GLOBALIZATION, PRIVATE SECTOR DEBT, MARKETS, DEBT, FINANCIAL CRISES, LOCAL GOVERNMENT, RETURN, OPEN ECONOMY, BUSINESS CYCLE, PUBLIC DEBT MANAGEMENT, INTERNATIONAL ECONOMICS, REAL INTEREST RATE, RESERVES, NEGATIVE SHOCKS, GROSS DOMESTIC PRODUCT, PENSION FUNDS, COMMODITY PRICE, FINANCE, FOREIGN CURRENCY, TAXES, EXPENDITURE, DEBT LEVELS, EMERGING MARKETS, INCOME TAXES, INVESTORS, SOVEREIGN DEBT, DEBT RATIO, FEDERAL RESERVE, GOOD, CENTRAL GOVERNMENT DEBT, FEDERAL RESERVE BANK, INTERNATIONAL FINANCIAL STATISTICS, TRANSPARENCY, LONG-TERM INTEREST RATE, PRIVATE SECTOR CREDIT, MARKET CONDITIONS, ACCESS TO CAPITAL, FINANCIAL CRISIS, FUTURE, DEBT CRISES, SHORT-TERM DEBT, BUDGETS, LONG-TERM INTEREST RATES, GOVERNMENT EXPENDITURE, EXPENDITURES, PORTFOLIO ALLOCATION, TAX RATES, SHARES, BALANCE SHEET, DEBT STOCKS, MARKET, DEBT RATIOS, PUBLIC DEBT, TREASURY, SOLVENCY, MACROECONOMIC VARIABLES, BUSINESS CYCLES, CURRENCIES, GOVERNMENT DEBT, GOODS, INVESTOR, STOCKS, OUTSTANDING DEBT, BOND, DOMESTIC CREDIT, SOVEREIGN BONDS, SHARE, BALANCE SHEETS, POVERTY, FINANCIAL MARKETS, TREASURY YIELDS, REVENUE, EXTERNAL DEBT, LENDING, CREDIT GROWTH, PENSION FUND, EXCHANGE RATE, INSTRUMENT, BANKING CRISES, WITHDRAWAL OF FUND, COMMODITY PRICES, LIABILITIES, INTERNATIONAL MARKETS, INTERNATIONAL SETTLEMENTS, GUARANTEE, DEBT RELIEF,
Online Access:	http://documents.worldbank.org/curated/en/2016/06/26514565/challenges-fiscal-policy-emerging-developing-economies https://hdl.handle.net/10986/24642
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