Path-breaking research on one of the most important macroeconomic policy challenges in the post-crisis world, presented in accessible language Written and researched by a team of experts from the International Monetary Fund, other policy-making institutions, and academia, this timely book looks at fiscal adjustment plans in advanced economies, comparing the planned or projected reductions in debts and deficits to the actual outcomes, and explaining why objectives were met in some cases but missed in others. An overview reveals pitfalls to avoid and lessons learned for securing successful fiscal adjustment. Written by experts in the field Addresses public concern about skyrocketing government debts Contains cutting edge research that changes the way we look at fiscal adjustment Presents meticulous archival research in compelling and engaging case studies Explores lessons learned and policy implications going forward Includes country coverage of all G7 and European Union economies Educating and informing investors, economists, and the general public, this important book looks at why some attempts to curb debts and deficits succeed whereas others fail, as well as how to ensure successful fiscal adjustment in the period ahead.

Path-breaking research on one of the most importantmacroeconomic policy challenges in the post-crisis world, presentedin accessible languageWritten and researched by a team of experts from theInternational Monetary Fund, other policy-making institutions, andacademia, this timely book looks at fiscal adjustment plans inadvanced economies, comparing the planned or projected reductionsin debts and deficits to the actual outcomes, and explaining whyobjectives were met in some cases but missed in others. An overviewreveals pitfalls to avoid and lessons learned for securingsuccessful fiscal adjustment.* Written by experts in the field* Addresses public concern about skyrocketing governmentdebts* Contains cutting edge research that changes the way we look atfiscal adjustment* Presents meticulous archival research in compelling andengaging case studies* Explores lessons learned and policy implications goingforward* Includes country coverage of all G7 and European UnioneconomiesEducating and informing investors, economists, and the generalpublic, this important book looks at why some attempts to curbdebts and deficits succeed whereas others fail, as well as how toensure successful fiscal adjustment in the period ahead.

Foreword ixAcknowledgments xiIntroduction xiiiCHAPTER 1 Canada: A Success Story 1Cemile Sancak, Lucy Qian Liu, and Taisuke NakataIntroduction 1Background 2Plans versus Outcomes: Macroeconomic Factors 7Nature and Composition of Adjustment 13Structural Reforms 21Extent to which Adjustments Were Sustained 23Conclusion 25Notes 27CHAPTER 2 United States: The Quest for Fiscal Discipline31Jiri JonasIntroduction 31First Attempt: Balanced Budget and Emergency Deficit Control Act1985 33Second Attempt: Omnibus Budget Reconciliation Act of 1990 36Third Attempt: Omnibus Budget Reconciliation Act of 1993 38Actual versus Projected Fiscal Performance under Omnibus BudgetReconciliation Act of 1993 421990s Deficit Reduction: Good Policy or Good Luck? 44Easy Won, Easy Lost? 50Conclusion 52Notes 54CHAPTER 3 France: Virtue and Fortune 57Edouard Martin, Irina Tytell, and Irina YakadinaIntroduction: Factors Underlying the Need for FiscalConsolidation 57Early Attempts at Fiscal Adjustment 61A First Attempt at Medium-Term Fiscal Consolidation,1994-97 64A More Systematic Approach to Medium-Term Budgeting:Consolidation Experiences under the Stability and Growth Pact72Conclusion 81Notes 82CHAPTER 4 Germany: Fiscal Adjustment Attempts With and WithoutReforms 85Christian Breuer, Jan Gottschalk, and Anna IvanovaIntroduction 851975-79 Consolidation Attempt 881981-85 Consolidation Attempt 931991-95 Consolidation Attempt 992003-07 Consolidation Attempt 105Lessons 110Notes 112CHAPTER 5 United Kingdom: Four Chancellors Facing Challenges115Toni Ahnert, Richard Hughes, and Keiko TakahashiIntroduction 115Selection of Consolidation Plans 116Background, Content, and Performance of the Four AdjustmentPlans 117Determinants of Success and Failure 125Lessons from Success and Failure 138Appendix 5A. United Kingdom: Fiscal Adjustment Plans andOutturns 140Notes 150CHAPTER 6 Italy: Medium-Term Fiscal Planning under FrequentGovernment Changes 153Fabrizio Balassone, Sandro Momigliano, and Pietro RizzaIntroduction 153A Brief History of Italy's Fiscal Planning Framework155Short-Term Origins of Medium-Term Failures 157A Narrative of Design and Performance of Pre- and Post-EuropeanMonetary Unit Plans 162Implementing Plans for the Year Ahead 165Two Important Plans Analyzed in Detail 167Conclusion 172Notes 174CHAPTER 7 Japan: Fiscal Adjustment Plans and MacroeconomicShocks 177Keiko Takahashi and Kiichi TokuokaIntroduction 177The 1997 Fiscal Structural Reform Act 178Medium-Term Fiscal Adjustment Plans: Fiscal Year 2002 and theFollowing 189Conclusion 203Appendix 7A: The Bohn Fiscal Sustainability Test 206Appendix 7B: Timeline of Medium-Term Fiscal Adjustment Plans inJapan 209Notes 209CHAPTER 8 The Performance of Large Fiscal Adjustment Plans inthe European Union: A Cross-Country Statistical Analysis 213S. Ali Abbas, Fuad Hasanov, Paolo Mauro, and JunhyungParkIntroduction 213Data, Sample Selection, and Methodology 216Descriptive Analysis 219Regression Analysis 232Conclusion 241Appendix 8A: Data Issues and Cyclical Adjustment 243Appendix 8B: Timeline for European Monetary Integration(1990-2009) 245Notes 246CHAPTER 9 Conclusion 249Key Findings: What Failed and What Worked in Past Attempts atFiscal Adjustment 251Implications for Planned Adjustments 255Notes 258References 259About the Project Team 267Index 271