Working Paper: NBER ID: w20564
Authors: Joshua Aizenman; Gunnar Gunnarsson
Abstract: This paper reviews recent research dealing with fiscal discipline and revisit the issues of fiscal control in federal systems, focusing on selective case studies covering the 2000s, before and after the Global Financial Crisis (GFC). We start by contrasting the recent fiscal history of California to that of Greece, illustrating the different ways of dealing with fiscal deficiencies in a mature union, U.S., versus a young union, Eurozone. We continue with an overview of the fiscal developments in Brazil, illustrating the challenges facing federal systems in emerging markets, and possible ways to move forward in upgrading a country's fiscal institutions. We conclude with the fiscal history of Iceland before and after the financial crisis--a standalone small country, assessed favorably by rating agencies prior to the GFC, and now recovering from a deep financial crisis.
Keywords: No keywords provided
JEL Codes: F36; F41
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| GFC (F53) | vulnerabilities of countries with strong fiscal positions (F65) |
| vulnerabilities of countries with strong fiscal positions (F65) | rapid increases in public debt-to-GDP ratios (H69) |
| deep financial and banking crises (F65) | socialization of private losses (P31) |
| socialization of private losses (P31) | fiscal stability (E63) |
| institutional reforms (O17) | procyclical biases of fiscal policy (E62) |
| improved fiscal governance (O23) | procyclical fiscal behavior (E62) |
| institutional quality (L15) | fiscal performance (E62) |
| maturity of fiscal unions (F36) | outcomes of fiscal crises (H12) |
| imposing fiscal discipline (E62) | ongoing efforts to improve institutional capacities (O17) |