International Economics

<< N°172

  N°172  
Issue Q3 2022  
When do we repair the roof? Insights from responses to fiscal crisis early warning signals  
Jiro Honda
René Tapsoba
Ismael Issifou
 
Should policymakers wait for fiscal crisis early warning signals before repairing the roof? We answer this question by investigating the interlinkages between early warning signals for fiscal crises, policy responses, and policy outcomes, using a broad panel of 119 countries. We find that fiscal adjustment is a good remedy for countries that act proactively, reducing their likelihood of facing fiscal crisis by up to 60 percent. These findings highlight the prominence of strengthening institutions towards further incentivizing policymakers to repair the roof when the sun is shining.
Abstract

   
Early warning signal ; Fiscal consolidation ; Fiscal crisis ; Keywords
H68 ; E62 ; H62 ; JEL classification
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