Policy corner: Past fiscal adjustments: Lessons from failures and successes

Abstract

This paper analyzes large fiscal adjustment plans, defined on the basis of the envisaged reduction in the public debt or deficit, and it compares ex ante planswith ex post outcomes. The motivation for this novel approach is two-fold. First, useful lessons can be drawn not only from successes, but also from failures tomeet policy objectives. Second, by taking into account whether observedoutcomes stemmed from intended policies or unexpected developments, thispaper sheds new light on some of the findings obtained by studies that had reliedon a purely ex post approach. The evidence is based on in-depth individualcountry case studies for each of the G7 countries and on a systematic, crosscountry statistical analysis of all fiscal adjustment plans presented by allEuropean Union countries during the past two decades. © 2013 International Monetary Fund.