IMF Working Papers

The Effects of Fiscal Consolidations on the Debt Distribution

By Francesco Frangiamore, Davide Furceri, Domenico Giannone, Faizaan Kisat, Pietro Pizzuto

October 3, 2025

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Format: Chicago

Francesco Frangiamore, Davide Furceri, Domenico Giannone, Faizaan Kisat, and Pietro Pizzuto. "The Effects of Fiscal Consolidations on the Debt Distribution", IMF Working Papers 2025, 201 (2025), accessed October 4, 2025, https://doi.org/10.5089/9798229025331.001

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Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

This paper estimates the effects of fiscal expenditure consolidations on the entire distribution of public debt-to-GDP for an unbalanced sample of 192 countries over the period 1991-2021. Employing panel location-scale models, we show that government expenditure cuts significantly lower the location (average) of the future debt-to-GDP distribution and its scale (variance), thus also implying a reduction in the uncertainty surrounding public debt. Consequently, we uncover a downward sloping trend in the effects of government expenditure consolidations across the quantiles of the debt-to-GDP distribution. These effects persist up to a 4-year forecast horizon, with the highest reduction occurring on the right tail of the debt-to-GDP distribution, defined as debt-at-risk. We also show that fiscal expenditure consolidations are more effective in reducing debt-to-GDP when the debt levels are higher and when countries adopt a fiscal rule.

Subject: Asset and liability management, Debt management, Expenditure, Fiscal consolidation, Fiscal policy, Fiscal rules, Public debt

Keywords: Debt management, Debt-at-risk, Expenditure consolidations., Fiscal consolidation, Fiscal policy, Fiscal rules, Public debt

Publication Details

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