“Does economic complexity reduce the probability of a fiscal crisis?”

Higher economic complexity of a country reduces the probability of sufferinga fiscal crisis between 46% and 57%. Along with institutional factors,complexity is shown to be sufficient to describe the risk of facing episodes offiscal distress. On the contrary, the role of variables frequently emphasizedby the literature and policy markets, such as the debt-output ratio, realgrowth, inflation, terms of trade or fiscal balance, is very modest orinsignificant. Development strategies that aim for greater economiccomplexity also promise to reduce countries’ fiscal vulnerability.

Blogs Publicados