Fiscal Sustainability in Theory and Practice: A Handbook

Fiscal Sustainability in Theory and Practice: A Handbook

Fiscal Sustainability in Theory and Practice: A Handbook

Fiscal Sustainability in Theory and Practice: A Handbook

Synopsis

Fiscal sustainability analysis is the use of a simple set of tools to analyze a government's budget and its debt position, and leads to conclusions - given the government's debt level - about the appropriateness of fiscal policy. Many economists are familiar with fiscal sustainability analysis, but there is no single reference work that explains it. Fiscal Sustainability in Theory and Practice fills this gap.The handbook is organized around three themes: (i) Basic theory and tools for everyday use, (ii) The effects of business cycles on public finance and the role of fiscal rules, and (iii) Crises and their impact on fiscal sustainability. The first theme is central to the book's purpose of bringing the basic theoretical literature together, along with a set of examples used to illustrate particular methods of analysis. The second and third themes develop the topic of fiscal sustainability further, by extending it to topics at the forefront of policy debates in the recent past. Aimed at economists previously unfamiliar with fiscal sustainability analysis, this book will also serve as a useful reference work for all economists with either an advanced undergraduate or basic graduate level of training.

Excerpt

As the title suggests, this book is intended as an introduction to the theory of fiscal sustainability and the practice of fiscal sustainability assessment. It begins with an overview of the models and case studies presented and explains why topics such as contingent liabilities, external debt position, and fiscal federalism are not covered in detail

This work evolved over time, as the need for a resource on fiscal sustainability analysis became apparent to the membership of the World Bank’s Quality of Fiscal Adjustment Thematic Group (QFA TG). Fiscal sustainability has become a prominent issue in developing countries, and fiscal sustainability assessments have become an increasingly required component of macroeconomic analysis at the World Bank. Unfortunately, there was no single, basic source of information on this topic. Country economists new to this type of analysis could rely on sample work by other economists at the Bank or delve into scattered journal articles for the theoretical background. Frequently, however, work on fiscal sustainability analysis would be undertaken by hired experts from the Bank’s Development Economics Research Group (DECRG) or Poverty Reduction and Economic Management, Economic Policy Group (PRMEP) or by outside academics.

I assumed leadership of the qfa tg in 2001, upon joining prmer At that time, fiscal sustainability analysis was identified as a core area in which this group should provide leadership and support to economists working in the regional departments of the World Bank. the membership of the . . .

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