Fiscal adjustments key to growth in credit-constrained economies.
The paper looks at how reducing public debt through government spending changes affects economic growth in countries with limited access to credit. It studied 107 countries from 1980 to 2012 and found that cutting spending quickly can slow down growth when credit is tight. Gradual cuts using a mix of revenue and spending measures can help the economy grow while reducing debt. It's important to protect public investments and make changes to boost productivity for long-term growth.