The Unassuming Economist

A new IMF working paper constructs a new database on fiscal consolidation of 14 Latin American and Caribbean economies over the period 1989-2016. This paper further classifies “the consolidation episodes as “tax-based” or “expenditure-based” depending on whether tax hikes or expenditure cuts account for most of the budgetary impact of the consolidation.”

“The average consolidation size (excluding zero observations i.e. considering that a fiscal policy action occurred) is 0.9 percent of GDP with a standard deviation of about 1 percentage point (Table 1). Expenditure based consolidations are typically larger, although comparisons along this dimension should be made with care given the relatively small number of expenditure-based consolidations.”