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The effectiveness of recent fiscal stimulus packages significantly depends on the assumption of non-Ricardian savings behavior. We show that, under the same assumption, fiscal deficits can have worrisome implications if they turn out to be permanent. First, if they occur in large countries they significantly raise the world real interest rate. Second, they cause a short run current account deterioration equal to around 50 percent of the fiscal deficit deterioration. Third, the longer run current account deterioration equals almost 75 percent for a large economy such as the United States, and a

This paper discusses two ways of evaluating the quasi-fiscal deficit (QFD) and the link between them. It also suggests how to properly account for the QFD when calculating the overall deficit of the public sector. Finally, using an example of the energy market, it shows how to untangle a web of mutual nonpayments and properly evaluate the QFD generated in a sector characterized by the presence of both private and public agents

In the government’s Budget, the Treasury projects that on current policies the government will be running an operating deficit for six straight years (while in the 7th the surplus is so tiny that even if it were not for Eric Crampton’s point about tobacco excise revenue we might as well just call it a coin … Continue reading Two sets of fiscal deficits

Intro -- Contents -- Foreword -- Acknowledgments -- Part I. Overview -- 1. Measuring the Fiscal Deficit: Overview of the Issues -- Part II. The Adequacy of Summary Measures of the Fiscal Deficit -- 2. Fiscal Deficit Measurement -- Basic Issues -- 3. Are All Summary Indicators of the Stance of Fiscal Policy Misleading? -- 4. Measurement of Fiscal Performance in IMF-Supported Programs: Some Methodological Issues -- 5. Fiscal Impulse Measures and Their Fiscal Impact -- Part III. Conventional and Adjusted Fiscal Deficits -- 6. The Cash Deficit: Rationale and Limitations -- 7. Government Arrears in Fiscal Adjustment Programs -- 8. Credit Subsidies in Budgetary Lending: Computation, Effects, and Fiscal Implications -- 9. Effects of Inflation on Measurement of Fiscal Deficits: Conventional Versus Operational Measures -- Part IV. Coverage of the Public Sector -- 10. Toward Defining and Measuring the Fiscal Impact of Public Enterprises -- 11. Amalgamating Central Bank and Fiscal Deficits -- 12. Impact of Public Financial Institutions on Fiscal Stance -- Part V. The Public Sector's Intertemporal Budget Constraint -- 13. The Deficit as an Indicator of Government Solvency: Changes in Public Sector Net Worth -- 14. Measurement of the Public Sector Deficit and Its Implications for Policy Evaluation and Design -- 15. Budgetary Impact of Privatization -- 16. Government Contingent Liabilities and Measurement of Fiscal Impact.

"Although realizing losses—or, running quasi-fiscal deficits—is new to the Fed, it is more common in developing countries. The consequences of running quasi-fiscal deficits include inflation and lack of central bank credibility." ~ Nicolas Cachanosky

This paper examines the relation between fiscal deficits and growth for a panel of 45 developing countries. Based on a consistent treatment of the government budget constraint, it finds evidence of a threshold effect at a level of the deficit around 1.5% of GDP. While there appears to be a growth payoff to reducing deficits to this level, this effect disappears or reverses itself for further fiscal contraction. The magnitude of this payoff, but not its general character, necessarily depends on how changes in the deficit are financed (through changes in borrowing or seigniorage) and on how the change in the deficit is accommodated elsewhere in the budget. We also find evidence of interaction effects between deficits and debt stocks, with high debt stocks exacerbating the adverse consequences of high deficits.