Publication:
Expansionary Austerity: Reallocating Credit Amid Fiscal Consolidation

dc.contributor.authorMorais, Bernardo
dc.contributor.authorPerez-Estrada, Javier
dc.contributor.authorPeydró, José-Luis
dc.contributor.authorRuiz-Ortega, Claudia
dc.date.accessioned2021-05-13T16:18:13Z
dc.date.available2021-05-13T16:18:13Z
dc.date.issued2021-05
dc.description.abstractThis paper shows expansionary fiscal austerity via reallocation of credit supply, but with a raise in poverty. For identification, the paper exploits the introduction of a Mexican law limiting the debt of subnational governments along with matched credit register, firm, bank, and state datasets. After the law, states with higher ex ante public debt grow substantially faster, despite larger fiscal consolidation (higher taxes and lower public expenditure). Banks operating in more indebted states reallocate credit supply away from local governments into private firms, with stronger effects for banks with higher exposure to local public debt, consistent with lowering crowding out. Effects only happen after the law, not before, and there are strong firm-level real effects associated. The reduction of crowding out is stronger for financially constrained firms and for firms operating in states with higher ex ante public spending on social services over infrastructure projects. In states more affected by the law, despite better economic effects, extreme poverty increases––especially in states with higher ex ante public spending on social services over infrastructure––consistent with a strong reduction for social services during the fiscal consolidation.en
dc.identifierhttp://documents.worldbank.org/curated/en/147941620675969963/Expansionary-Austerity-Reallocating-Credit-Amid-Fiscal-Consolidation
dc.identifier.doi10.1596/1813-9450-9655
dc.identifier.urihttps://hdl.handle.net/10986/35568
dc.languageEnglish
dc.publisherWorld Bank, Washington, DC
dc.relation.ispartofseriesPolicy Research Working Paper;No. 9655
dc.rightsCC BY 3.0 IGO
dc.rights.holderWorld Bank
dc.rights.urihttp://creativecommons.org/licenses/by/3.0/igo
dc.subjectFISCAL POLICY
dc.subjectGOVERNMENT LENDING
dc.subjectSUBNATIONAL DEBT
dc.subjectCROWDING OUT
dc.subjectEMERGING MARKET ECONOMIES
dc.subjectBANKS
dc.subjectPUBLIC DEBT
dc.titleExpansionary Austerityen
dc.title.subtitleReallocating Credit Amid Fiscal Consolidationen
dc.typeWorking Paperen
dc.typeDocument de travailfr
dc.typeDocumento de trabajoes
dspace.entity.typePublication
okr.crossref.titleExpansionary Austerity: Reallocating Credit amid Fiscal Consolidation
okr.date.disclosure2021-05-10
okr.date.doiregistration2025-04-10T12:00:23.303909Z
okr.doctypePublications & Research
okr.doctypePublications & Research::Policy Research Working Paper
okr.docurlhttp://documents.worldbank.org/curated/en/147941620675969963/Expansionary-Austerity-Reallocating-Credit-Amid-Fiscal-Consolidation
okr.guid147941620675969963
okr.identifier.doi10.1596/1813-9450-9655
okr.identifier.externaldocumentum090224b08859fe77_1_0
okr.identifier.internaldocumentum33064783
okr.identifier.reportWPS9655
okr.importedtrueen
okr.language.supporteden
okr.pdfurlhttp://documents.worldbank.org/curated/en/147941620675969963/pdf/Expansionary-Austerity-Reallocating-Credit-Amid-Fiscal-Consolidation.pdfen
okr.region.administrativeLatin America & Caribbean
okr.region.countryMexico
okr.statistics.combined1190
okr.statistics.dr147941620675969963
okr.statistics.drstats719
okr.topicPublic Sector Development::Public Financial Management
okr.topicPublic Sector Development::Public Sector Expenditure Policy
okr.topicFinance and Financial Sector Development::Debt Markets
okr.topicGovernance::Local Government
okr.unitDevelopment Research Group, Development Economics
relation.isSeriesOfPublication26e071dc-b0bf-409c-b982-df2970295c87
relation.isSeriesOfPublication.latestForDiscovery26e071dc-b0bf-409c-b982-df2970295c87
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