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Fiscal Policy Space And Economic Performance: Some Stylized Facts

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Executive Summary

This paper complements the cross-country approach by examining the correlates of GDP per capita growth acceleration around "Significant" public expenditure episodes by reorganizing the data around turning points, or "Events". Here the authors define a growth event as an increase in average per capita growth of at least 2 percentage points (pp) sustained for 5 years, fiscal event as an increase in the primary fiscal expenditure annual growth rate of approximately 1 pp sustained for 5 years and not accompanied by an aggravation of the fiscal deficit beyond 2% of GDP. These definitions of events are applied to database of 140 countries (118 developing countries) over 1972-2005, providing a summary but encompassing description of "what is in the data".

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