International Differences in Fiscal Outcomes during the Global Crisis

We examine the cross-country dispersion in fiscal outcomes during 2008-09. Controlling for output, we find that the declines in the overall and structural fiscal balances were larger for those countries experiencing larger increases in unemployment and where credit growth during the pre-crisis period was more rapid. However, controlling for output and unemployment, there is no systematic covariation between fiscal outcomes and a wider range of initial conditions and country characteristics that have been cited as possible drivers of fiscal outcomes during this episode.