Market Reforms and Public Debt Dynamics in Emerging Market and Developing Economies

Author: Mr. Zamid Aligishiev, Ms. Gabriela Cugat, Mr. Romain A Duval, Davide Furceri, João Tovar Jalles, Ms. Margaux MacDonald, Mr. Giovanni Melina, Mr. Futoshi Narita, Mr. Chris Papageorgiou, and Carlo Pizzinelli

Market-oriented structural reforms promote economic growth and strengthening public finances. This note shows that reforms are associated with sizable and long-lasting reductions in the debt-to-GDP ratio, mainly through higher fiscal revenues and lower borrowing costs

Volume/Issue: Volume 2023 Issue 005

Publication date: September 2023

ISBN: 9798400247101

$20.00

Add to Cart by clicking price of the language and format you'd like to purchase

Available Languages and Formats

	Paperback	PDF	ePub
English

Prices in red indicate formats that are not yet available but are forthcoming.

Topics covered in this book

This title contains information about the following subjects. Click on a subject if you would like to see other titles with the same subjects.

Exports and Imports , Finance , Economics- Macroeconomics , Public Finance , Economics / General , Fiscal Policy , Debt Dynamics , Economic Regulation , Structural Reforms , Emerging Market Economies , Low-Income Developing Countries , market reform , reform impact , GDP ratio , government debt reduction , government policy response , Emerging and frontier financial markets , Debt reduction , Fiscal stance , Global , Asia and Pacific , Debt sustainability analysis

Also of interest

The Return to Fiscal Rules

The State as Financier of Last Resort

Broadening the Gains from Generative AI: The Role of Fiscal Policies

Gen-AI: Artificial Intelligence and the Future of Work

Summary

Many emerging market and developing economies face a difficult trade-off between economic support and fiscal sustainability. Market-oriented structural reforms ease this trade-off by promoting economic growth and strengthening public finances. The empirical analysis in this note, based on 62 EMDEs over 1973-2014, shows that reforms are associated with sizeable and long-lasting reductions in the debt-to-GDP ratio mainly through higher fiscal revenues and lower borrowing costs. These effects are larger in countries with greater tax efficiency, lower informality, and higher initial debt. Moreover, a model-based analysis elaborates on how such fiscal gains can be enhanced when revenue windfalls associated with reforms are saved or channeled through higher public investment.