# Contents

|1.|Introduction ...................................................................................................................................... - 2 -|
|---|---|
|2.|Literature review ............................................................................................................................... - 8 -|
|3.|Conceptual framework ................................................................................................................... - 10 -|
|4.|Estimation methodology ................................................................................................................. - 12 -|
|I.|Identifying fiscal adjustment need .............................................................................................. - 12 -|
|II.|Identifying fiscal adjustment ....................................................................................................... - 13 -|
|III|.<br>Measuring budget rigidities .................................................................................................... - 14 -|
|IV|.<br>Estimation framework ............................................................................................................ - 15 -|
|V.|Results ............................................................................................................................................. - 16 -|
||On the determinants of need of fiscal adjustment ......................................................................... - 16 -|
||Probability of a successful fiscal adjustment .................................................................................. - 21 -|
|VI.|Robustness checks ...................................................................................................................... - 27 -|
|VII.|Conclusion ................................................................................................................................... - 29 -|
|Refe|rences .............................................................................................................................................. - 31 -|
|App|endix 1: Literature Review ................................................................................................................ - 34 -|
|App|endix 2: Episodes of fiscal need and fiscal adjustment .................................................................... - 37 -|
|App|endix 3: Linear probability models: .................................................................................................. - 47 -|
|App|endix 4: Logit models: ....................................................................................................................... - 53 -|
|App|endix 5: Conditional logit models: .................................................................................................... - 61 -|
|App|endix 6: Model with sample selection correction ............................................................................ - 69 -|
|App|endix 7: Linear probability model controlling for size of the need (primary gap) ........................... - 73 -|
|App|endix 8: Linear probability model with dependent variable identified as Lavigne (2011) ............... - 77 -|
|App|endix 9: Linear probability model with need under stressed conditions ......................................... - 81 -|

- 1 -