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Fiscal consolidation: global practices

Vol. 9, Iss. 27, JULY 2016

PDF  Article PDF Version

Received: 21 June 2016

Received in revised form: 30 June 2016

Accepted: 7 July 2016

Available online: 28 July 2016

Subject Heading: Economic policy

JEL Classification: E20, E60, E62, E66

Pages: 51-62

Shvandar K.V. Financial Research Institute, Moscow, Russian Federation
shvandar@nifi.ru

Anisimova A.A. Financial Research Institute, Moscow, Russian Federation
Aanisimova@nifi.ru

Importance Many developed nations have been changing their spending and taxation policies for recent two decades. They do it as they need to fund budget deficits that are increasing due to growing governmental spending on various governmental programs. Debt crises stemmed from such policies of developed economies. Considering the existing situation, the countries opted for fiscal consolidation.
Objectives The research analyzes the fiscal consolidation process in global practices, and overviews its basic reasons.
Methods In the first part of our research, we set forth theoretical aspects of fiscal consolidation, its basic strategies in global practices, depending on the economic situation. The second part is dedicated to countries, which completed fiscal consolidation, and analyzes measures of fiscal consolidation, and additional reforms.
Results Upon the analysis of fiscal consolidation evidence from global practices, we found the principal goal of fiscal consolidation, necessary factors for long-term positive effect of fiscal reforms and economic growth, and basic difficulties the countries face during fiscal consolidation.
Conclusions and Relevance Fiscal consolidation basically pursues reducing budget deficit and government debt. Supplemental reforms should be conducted to reach the maximum positive effect of fiscal reforms, and economic growth in the long run. As the analysis of fiscal consolidation shows, it is difficult to preserve positive results of the reforms within a long-term period.

Keywords: fiscal consolidation, reforms, tax proceeds, budget deficit, government debt

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