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This paper analyzes the experience of 99 advanced and developing economies in restoring fiscal sustainability during 1980 - 2008 after banking crises, which led to large accumulation of public debt. It finds that successful debt reductions have relied chiefly on generation of large primary surpluses in post-crisis years through current expenditure cuts. These savings have been accompanied by growth-promoting measures and a supportive monetary policy stance. While these results are consistent with the existing literature, the paper finds that revenue-raising measures increased the likelihood of successful consolidation in countries that faced large adjustment needs after the crisis. This reflects the fall in effectiveness of spending cuts when deficit reduction needs are large independent of initial tax ratios.

Financial crises. --- Debts, Public. --- Debts, Government --- Government debts --- National debts --- Public debt --- Public debts --- Sovereign debt --- Debt --- Bonds --- Deficit financing --- Crashes, Financial --- Crises, Financial --- Financial crashes --- Financial panics --- Panics (Finance) --- Stock exchange crashes --- Stock market panics --- Crises --- Banks and Banking --- Financial Risk Management --- Macroeconomics --- Public Finance --- General Financial Markets: Government Policy and Regulation --- Fiscal Policies and Behavior of Economic Agents: General --- National Government Expenditures and Related Policies: General --- Debt Management --- Sovereign Debt --- Fiscal Policy --- Financial Crises --- Finance --- Public finance & taxation --- Economic & financial crises & disasters --- Fiscal consolidation --- Banking crises --- Debt reduction --- Debt management --- Fiscal policy --- Debts, Public --- Financial crises --- Debts, External

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This paper shows that increasing government social expenditures can make a substantive contribution to increasing household consumption in China. The paper first undertakes an empirical study of the relationship between the savings rate and social expenditures for a panel of OECD countries and provides illustrative estimates of their implications for China. It then applies a generational accounting framework to Chinese household income survey data. This analysis suggests that a sustained 1 percent of GDP increase in public expenditures, distributed equally across education, health, and pensions, would result in a permanent increase the household consumption ratio of 1¼ percentage points of GDP.

Cost and standard of living --- Public welfare --- Government spending policy --- Finance. --- China --- Social policy. --- Economic policy. --- Expenditures, Public --- Public spending policy --- Spending policy, Government --- Economic policy --- Finance, Public --- Full employment policies --- Unfunded mandates --- Benevolent institutions --- Poor relief --- Public assistance --- Public charities --- Public relief --- Public welfare reform --- Relief (Aid) --- Social welfare --- Welfare (Public assistance) --- Welfare reform --- Human services --- Social service --- Government policy --- Macroeconomics --- Public Finance --- Aggregate Factor Income Distribution --- Macroeconomics: Consumption --- Saving --- Wealth --- Urban, Rural, and Regional Economics: Household Analysis: General --- National Government Expenditures and Related Policies: General --- National Government Expenditures and Health --- Public finance & taxation --- Income --- Consumption --- Household consumption --- Expenditure --- Health care spending --- Economics --- China, People's Republic of