Structural Reforms and Fiscal Sustainability

doi:10.1017/9781108782517.010

7 - Structural Reforms and Fiscal Sustainability

from Part II - Macroeconomic Implications of Reforms

Published online by Cambridge University Press: 31 March 2020

Davide Furceri and

Edited by

Paul De Grauwe and

Nauro F. Campos: Affiliation:
University College London
Paul De Grauwe: Affiliation:
London School of Economics and Political Science
Yuemei Ji: Affiliation:
University College London

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Summary

This paper examines the effect of structural (domestic and external finance, trade and product market) reforms on public debt. It applies the local projection method to a dataset of major reforms and regulatory changes for a sample of 90 advanced and developing countries spanning between 1973 and 2003. The results suggest that over the medium term – that is, four to six years after the reform takes place – reforms contribute to lower the debt-to-GDP ratio. This effect depends on the initial debt-to-GDP at the time of the reform. The findings are robust to the inclusion of all reforms simultaneously and to an instrumental variable approach, which uses political economy drivers of reforms as instruments.

Keywords

public debt growth deregulation impulse responses local projection method nonlinearities instrumental variables

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Type: Chapter
Information: Economic Growth and Structural Reforms in Europe , pp. 214 - 238
DOI: https://doi.org/10.1017/9781108782517.010 [Opens in a new window]
Publisher: Cambridge University Press
Print publication year: 2020

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