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Fiscal Rule or Fiscal Crisis? Challenges to Fiscal Consolidation from a Global Perspective
The purpose of the conference is to analyze the determinants of successful fiscal policy consolidation and the basis for fiscal rules to assure fiscal sustainability over the economic cycle. It will examine the experience of advanced and emerging economies, with particular reference to the situation of Asian emerging economies.
The global financial crisis of 2007-2008 and its aftermath, most notably the development of the eurozone sovereign debt and banking crisis, have led to a renewed emphasis on the need for policy measures to ensure macroeconomic and financial stability in order to support sustainable growth. In particular, the large amounts of government debt issuance in response to the global financial crisis—to cover shortfalls in tax revenues, to fund stimulus measures and to recapitalize the financial sector—led to massive increases in government debt in many advanced economies. This rise in government debt was one of the direct causes of the Eurozone financial crisis. Moreover, other countries including the US, Japan and the UK with high debt ratios face potential financing risks, even though they are not experiencing crises at this time. These risks are being exacerbated by deteriorating long-term fundamentals, mainly related to higher fiscal expenditures and lower revenues associated with aging populations. Countries need to find the right balance between taking necessary fiscal consolidation steps but not dragging their economies into recession as a result of excessive fiscal drag in a generally weak economic environment.
In contrast, emerging Asian economies generally emerged from the global financial crisis with relatively healthy fiscal conditions. This partly reflects higher economic growth rates together with relatively small shares of government spending in GDP and, in some cases, financial repression that keeps the interest cost of government debt well below the growth rate of nominal GDP. However, these fundamentals are likely to worsen over time as populations in the region age, growth rates slow and financial liberalization continues. This conference will focus on the identification of and distillation from successful and unsuccessful experiences of fiscal consolidation and their lessons for emerging Asian economies.
The conference will gather well-known scholars and experts on fiscal policy and actively promote a discussion on relevant issues which is expected to contribute to the theoretical and empirical literature and regional policy dialogue. The key issue to be analyzed in the conference is the determinants of successful fiscal policy consolidation and the basis for fiscal rules to assure fiscal sustainability over the economic cycle, with particular reference to the situation of Asian emerging economies. In particular, the conference will cover the following thematic areas:
All papers prepared for this activity will be considered for publication in the ADBI policy briefs or working paper series and possibly for publication in the ADR. Authors will be requested to deliver publishable papers by the end of March 2013. After reviewing the papers' quality ADBI will decide which papers will be published in its policy briefs or working paper series. As a separate activity, the research papers will also be collected as new material for an edited publication by the PRI in 2013.
Bilingual (English, Japanese)
Policy Research Institute (PRI) of Ministry of Finance Japan
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