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Reconsidering Non-Keynesian Effects of Fiscal Consolidations over the Business Cycle

Author

Listed:
  • Alessandro Casini

    (Siena University)

Abstract

This paper uses fiscal consolidation experiences of a sample of OECD economies over the period 1970 to 2008 to examine the interplay between fiscal adjustments and economic performance.The main purpose of this paper is to study whetherthe impact of fiscal consolidation on the real economy is notsymmetric with respect to economic conditions. It followsAlesina and Ardagna (2010) and introduces a new approachbased on business cycle. The results suggest time variation inthe coefficients that describe the response of output to fiscalshocks. We find that fiscal austerity can be expansionarywhen it occurs in good times.

Suggested Citation

  • Alessandro Casini, 2013. "Reconsidering Non-Keynesian Effects of Fiscal Consolidations over the Business Cycle," Rivista di Politica Economica, SIPI Spa, issue 4, pages 11-45, October-D.
    • Handle: RePEc:rpo:ripoec:y:2013:i:4:p:11-45
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    More about this item

    Keywords

    non-Keynesian effects; fiscal consolidations; business cycle; cyclical phases; asymmetric output responses; output-gap;
    All these keywords.

    JEL classification:

    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
    • H60 - Public Economics - - National Budget, Deficit, and Debt - - - General
    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus

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