suggest an unsurprising direct fiscal implication of tax reforms in forms of a falling primary
surplus (which is affordable given the initial favourable situation typical prior to tax reform).
However, there is support for indirect fiscal consequences affecting the budget via short-run
growth effects. These effects appear to be positive for tax system and product market reforms and
negative for labour and financial market reforms.
Overall both test as described in both the last and this section do not show much support for a
strong fiscal impact even of major reform processes unless they are related to the fiscal system
itself as it is the case with tax reforms. Structural reforms and fiscal performance appear to be
quite detached developments.
An interesting link occurs with regard to the employed expectation indicators. Tax and labour
market reforms tend to be started when the general economic mood is relatively depressed or
positive, respectively. This corresponds to the fact that, once a reform process is initiated, the
confidence is boosted by tax reforms and dwindles with labour market reforms. Clearly, the
results suggest that expectation effects may constitute an important link between reforms and the
budgetary situation and deserve more attention.
4 Estimating a dynamic reform model
So far, reform events have been treated in a somewhat schematic way as one-off events
characterized as quick and short-run adjustments towards a new environment. This simplification
has been helpful to improve our understanding of some typical reform patterns, it does, however,
not capture the full dynamics of reform processes. Even when limiting the perspective to
relatively big reforms the results show that, sometimes, there are series of events with frequent
structural adjustments within a number of consecutive years before a new equilibrium is reached
(see table A-2 in the appendix). Furthermore, the preceding analysis had to abstract from the
experience of countries implementing strategies of slow but continuous reforms.
Given these limitations, the perspective is broadened in this section. The idea is to search now for
the impact of fiscal and general economic variables in the course of reform processes. In addition,
the testing is to look for a possible impact of reforms on consumer and investor expectation which
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