
Contents
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20.1 Introduction 20.1 Introduction
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20.2 Coordinating Fiscal Consolidation with Structural Reform 20.2 Coordinating Fiscal Consolidation with Structural Reform
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20.3 Specifics of Country Measures 20.3 Specifics of Country Measures
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20.3.1 United States 20.3.1 United States
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Structural Reform Structural Reform
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Fiscal Reform Fiscal Reform
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Fiscal Consolidation Fiscal Consolidation
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Structural Reform Structural Reform
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Fiscal Reform Fiscal Reform
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Fiscal Consolidation Fiscal Consolidation
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20.3.3 China 20.3.3 China
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Product Market Reform Product Market Reform
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Financial Market Liberalization Financial Market Liberalization
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Financial Liberalization and Fiscal Reform Financial Liberalization and Fiscal Reform
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Labor Market Reform Labor Market Reform
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20.4 Base Model 20.4 Base Model
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20.5 Literature Review 20.5 Literature Review
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20.6 Simulation Results of Coordinated Implementation of Country-Specific Measures 20.6 Simulation Results of Coordinated Implementation of Country-Specific Measures
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20.6.1 United States 20.6.1 United States
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20.6.2 Euro Area 20.6.2 Euro Area
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20.6.3 China 20.6.3 China
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20.7 Simulation Results of Coordinated Monetary and Fiscal Actions 20.7 Simulation Results of Coordinated Monetary and Fiscal Actions
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20.7.1 United States 20.7.1 United States
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20.7.2 Euro Area 20.7.2 Euro Area
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20.7.3 Japan 20.7.3 Japan
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20.7.4 Remaining Countries 20.7.4 Remaining Countries
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20.7.5 World 20.7.5 World
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20.8 Conclusion 20.8 Conclusion
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References References
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20 Fiscal Adjustment, Growth, and Global Imbalances
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Published:July 2014
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Abstract
Using the International Monetary Fund's Global Integrated Monetary and Fiscal Model (GIMF), this chapter examines how combining fiscal adjustment with structural reform and coordinated fiscal policy can reduce public debt, encourage economic growth, and lower global imbalances for all participating countries. It first considers the virtuous circle that can be generated when fiscal consolidation is accompanied by productivity-enhancing structural reform and monetary easing before discussing the specifics of the hypothetical policy actions put into the GIMF and the key features of the model in which the coordinated policy actions are embedded. It then reviews previous studies of the macroeconomic effects of fiscal consolidation. It shows that fiscal consolidation is typically associated with shrinking current-account deficits and slowing growth, but that structural and fiscal reform creates the potential for the world economy to grow while rebalancing global demand. The chapter also illustrates the potential for a virtuous circle to arise.
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