Fiscal Adjustment for Stability and Growth by James Daniel, Jeffrey Davis, Manal Fouad, and Caroline Van Rijckeghem published by IMF, indicated by Teresa Ter-Minassian (8/2006).
“The IMF’s approach to fiscal adjustment focuses on the role that sound and sustainable government finances play in promoting macroeconomic stability and growth. Achieving and maintaining such a fiscal position often requires adjusting fiscal policy, as well as strengthening fiscal institutions. Fiscal adjustment may involve either tightening or loosening the fiscal stance, depending on each country’s circumstances.1 This paper updates and replaces the original 1995 pamphlet, Guidelines for Fiscal Adjustment. It reflects the significant changes in the world economy and in the way the IMF has approached fiscal adjustment since then. The key changes include globalization, which raises new challenges and opportunities for fiscal policy; the increasing importance of balance sheet variables, as highlighted by debt and capital account crises; the growing perception of institutions as key determinants of development success and macroeconomic stability; and the greater emphasis on helping low-income countries scale up productive expenditure and make good use of increased aid…”