The Phasing of Fiscal Adjustments: What Works in Emerging Market Economies?


  • The authors wish to acknowledge the helpful comments of referees and Mark Flanagan, Mark Horton, Monmohan Kumar, Alex Segura-Ubiergo, and George Tsibouris on earlier drafts of the paper. The views reflect those of the authors and do not necessarily represent those of the National Statistics Institute of Italy, International Monetary Fund, and Office of the Presidency of the Government of Spain.

* Baldacci: National Institute of Statistics, Italy. E-mail: Clements: International Monetary Fund, Washington, DC, 20431. Tel: (202) 623-6950; Fax: (202) 589-6950; E-mail: Gupta: International Monetary Fund, Washington, DC, 20431. Tel: (202) 623-8872; E-mail: Mulas-Granados: Economic Office of the President, Spain. E-mail:


This paper investigates the political and economic determinants of successful fiscal adjustment in 25 emerging market economies from 1980 to 2001. The results show that large and back-loaded fiscal adjustments have the highest likelihood of success. Fiscal consolidations based on expenditure cuts increase the probability of approaching and achieving fiscal sustainability but are insufficient to maintain it unless accompanied by revenue reforms. Adjustment episodes launched in countries where governments enjoy a parliamentary majority and do not face imminent elections, are found to be more successful. Fiscal consolidations undertaken under IMF-supported programs also have a higher probability of success.