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On the predictability of narrative fiscal adjustments

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  • Hernández de Cos, Pablo
  • Moral-Benito, Enrique

Abstract

This paper shows that spending-based adjustments identified by DeVries et al. (2011) can be predicted on the basis of past output growth and other macroeconomic variables. Moreover, their contractionary effects vanish once we account for this source of endogeneity while tax-based consolidations remain contractionary.

Suggested Citation

  • Hernández de Cos, Pablo & Moral-Benito, Enrique, 2016. "On the predictability of narrative fiscal adjustments," Economics Letters, Elsevier, vol. 143(C), pages 69-72.
    • Handle: RePEc:eee:ecolet:v:143:y:2016:i:c:p:69-72
    DOI: 10.1016/j.econlet.2016.03.024
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    References listed on IDEAS

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    1. Juan S. Mora-Sanguinetti & Nuno Garoupa, 2015. "Litigation in Spain 2001-2010: Exploring the market for legar services," Working Papers 1505, Banco de España.
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    Citations

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    Cited by:

    1. Ms. Era Dabla-Norris & Frederico Lima, 2018. "Macroeconomic Effects of Tax Rate and Base Changes: Evidence from Fiscal Consolidations," IMF Working Papers 2018/220, International Monetary Fund.
    2. Alberto Alesina & Gualtiero Azzalini & Carlo Favero & Francesco Giavazzi & Armando Miano, 2018. "Is it the “How” or the “When” that Matters in Fiscal Adjustments?," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 66(1), pages 144-188, March.
    3. Tafuro, Andrea, 2023. "Labour market rigidity and expansionary austerity," Journal of Macroeconomics, Elsevier, vol. 75(C).
    4. Antonio De Vito & Martin Jacob & Dirk Schindler & Guosong Xu, 2023. "How Do Corporate Tax Hikes Affect Investment Allocation within Multinationals?," CESifo Working Paper Series 10272, CESifo.
    5. Alberto Alesina & Carlo Favero & Francesco Giavazzi, 2019. "Effects of Austerity: Expenditure- and Tax-Based Approaches," Journal of Economic Perspectives, American Economic Association, vol. 33(2), pages 141-162, Spring.
    6. Bardaka, Ioanna & Bournakis, Ioannis & Kaplanoglou, Georgia, 2021. "Total factor productivity (TFP) and fiscal consolidation: How harmful is austerity?," Economic Modelling, Elsevier, vol. 94(C), pages 908-922.
    7. Dabla-Norris, Era & Lima, Frederico, 2023. "Macroeconomic effects of tax rate and base changes: Evidence from fiscal consolidations," European Economic Review, Elsevier, vol. 153(C).
    8. Christian Breuer, 2019. "State Expansionary Austerity and Reverse Causality: A Critique of the Conventional Approach," Working Papers Series 98, Institute for New Economic Thinking.
    9. van der Wielen, Wouter, 2020. "The macroeconomic effects of tax changes: Evidence using real-time data for the European Union," Economic Modelling, Elsevier, vol. 90(C), pages 302-321.
    10. Breuer, Christian, 2017. "Expansionary Austerity and Reverse Causality," MPRA Paper 77556, University Library of Munich, Germany.
    11. Georgios Karras, 2019. "Macroeconomic Effects of Tax Changes: Evidence from a Sample of OECD Countries," SPOUDAI Journal of Economics and Business, SPOUDAI Journal of Economics and Business, University of Piraeus, vol. 69(3), pages 111-138, July-Sept.
    12. Paula Gil & Francisco Martí & Richard Morris & Javier J. Pérez & Roberto Ramos, 2019. "The output effects of tax changes: narrative evidence from Spain," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 10(1), pages 1-23, March.
    13. Cláudia Braz & Maria Manuel Campos, 2021. "Challenges in measuring fiscal effects," Economic Bulletin and Financial Stability Report Articles and Banco de Portugal Economic Studies, Banco de Portugal, Economics and Research Department.

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    More about this item

    Keywords

    Fiscal adjustment; Fiscal multiplier; Narrative approach;
    All these keywords.

    JEL classification:

    • H60 - Public Economics - - National Budget, Deficit, and Debt - - - General
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory

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