Antoine Goujard

Cross-Country Spillovers from Fiscal Consolidations

In many OECD countries, government debt reached levels over recent years that call for reduction over the medium to longer term to ensure public finance sustainability. This paper investigates the international transmission of fiscal consolidation shocks via trade flows. Using a measure of exogenous fiscal shocks in export markets, fiscal consolidation spillovers are found to slow domestic growth and decrease employment. When fiscal consolidation efforts are synchronised across partner countries, fiscal policies have large spillover effects on output. Spillovers of fiscal consolidations on growth are found to be initially larger between countries belonging to currency unions, though this larger impact vanishes over the medium term. Larger spillovers of fiscal consolidation coincide with stronger shifts in bilateral trade flows in currency unions in the short term, despite smaller adjustments in relative exchange rates. Spillovers of fiscal consolidation are also found to be more detrimental to domestic growth during economic downturns in export markets.

International Capital Mobility and Financial Fragility - Part 3: How Do Structural Policies Affect Financial Crisis Risk? Evidence from Past Crises Across OECD and Emerging Economies

This paper examines how structural policies can influence a countrys risk of suffering financial turmoil. Using a panel of 184 developed and emerging economies from 1970 to 2009, the empirical analysis examines which structural policies can affect financial stability by either shaping the financial account structure, by reducing the risk of international financial contagion, or by directly reducing the risk of financial crises. Differentiated capital controls are found to affect financial stability via the structure of the financial account. Moreover, a number of structural policies including regulatory burdens on foreign direct investment, strict product market regulation, or tax systems which favour debt over equity finance are found to bias external financing towards debt, thereby increasing financial crisis risk. By contrast, more stringent domestic capital adequacy requirements for banks, greater reliance of a domestic banking system on deposits, controls on credit market inflows, and openness to foreign bank entry are found to reduce the vulnerability to financial contagion. Finally, vulnerability to international bank balance-sheet shocks is found to be lower in situations of abundant global liquidity, underlining the importance of adequate central bank reactions in situations of financial turmoil. Flux de capitaux internationaux et fragilite financiere : Partie 3. Comment les politiques structurelles affectent-elles la probabilite de crise financiere? Analyse empirique des crises financieres passees des pays OCDE et emergents Cet article examine comment les politiques structurelles peuvent influencer le risque de crise financiere. L’analyse empirique porte sur un echantillon de 184 pays developpes et emergents de 1970 a 2009 et teste quelles politiques structurelles peuvent favoriser la stabilite financiere, soit en influant sur la structure du compte financier, soit en reduisant les risques de contagion financiere internationale, soit en reduisant directement le risque de crise financiere. Des mesures ciblees de controle des flux de capitaux ont influe sur la stabilite financiere en modifiant la structure des engagements internationaux. De plus, de nombreuses politiques structurelles, comme les restrictions trop importantes aux investissements directs etrangers, une reglementation des marches de produits defavorable a la competition, ou des systemes de taxation favorisant le financement par la dette au detriment des investissements de capitaux, ont contribue a reduire la stabilite financiere en augmentant la part de la dette dans les engagements externes des pays au detriment des IDEs ou des investissements de capitaux. En revanche, une meilleure reglementation des fonds propres bancaires, un ratio credits sur depots bancaires plus faible et une plus grande ouverture a l’entree des banques etrangeres ont reduit les risques de crises financieres lors des episodes de contagion bancaire. Enfin, la vulnerabilite des pays a la contagion par le systeme bancaire international a ete moindre lorsque la liquidite globale etait abondante, ce qui souligne l’importance d’une reaction appropriee des banques centrales lors des periodes d’instabilite financiere.