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Evidence on Fiscal Consolidations and the Evolution of Public Debt in Europe

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Author Info

  • Gianluca Cafiso
  • Roberto Cellini

Abstract

The objective of this paper is to gain insights into the relationship between deficit-reducing policies and the evolution of the debt/GDP ratio. We consider past events of fiscal consolidation in a selected group of EU countries, by using the new data set recently made available by Devries et al. (2011), and check what is the associated change of the debt/GDP ratio both from a short and medium-term perspective. Our results show that a favourable short-term response emerges in the majority of the countries considered, while the medium-term one is adverse for all. The analysis provides information to assess the convenience of deficit-reducing policies to contain or invert the evolution of the debt/GDP ratio.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2012/wp-cesifo-2012-12/cesifo1_wp4027.pdf
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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 4027.

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Date of creation: 2012
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Handle: RePEc:ces:ceswps:_4027

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Related research

Keywords: fiscal consolidation; debt/GDP ratio; European Union;

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References

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  1. Giancarlo Corsetti & Keith Kuester & Andre Meier & Gernot J. Mueller, 2010. "Debt Consolidation and Fiscal Stabilization of Deep Recessions," Economics Working Papers, European University Institute ECO2010/03, European University Institute.
  2. Cwik, Tobias J. & Wieland, Volker, 2009. "Keynesian government spending multipliers and spillovers in the Euro area," CFS Working Paper Series 2009/25, Center for Financial Studies (CFS).
  3. Coenen, Günter & Mohr, Matthias & Straub, Roland, 2008. "Fiscal consolidation in the euro area: Long-run benefits and short-run costs," Economic Modelling, Elsevier, Elsevier, vol. 25(5), pages 912-932, September.
  4. Christina D. Romer & David H. Romer, 2010. "The Macroeconomic Effects of Tax Changes: Estimates Based on a New Measure of Fiscal Shocks," American Economic Review, American Economic Association, American Economic Association, vol. 100(3), pages 763-801, June.
  5. Clinton, Kevin & Kumhof, Michael & Laxton, Douglas & Mursula, Susanna, 2011. "Deficit reduction: Short-term pain for long-term gain," European Economic Review, Elsevier, Elsevier, vol. 55(1), pages 118-139, January.
  6. Douglas Sutherland & Peter Hoeller & Rossana Merola, 2012. "Fiscal Consolidation: Part 1. How Much is Needed and How to Reduce Debt to a Prudent Level?," OECD Economics Department Working Papers 932, OECD Publishing.
  7. Gianluca Cafiso, 2012. "Debt developments and fiscal adjustment in the EU," Intereconomics: Review of European Economic Policy, Springer, Springer, vol. 47(1), pages 61-72, January.
  8. Alberto Alesina & Silvia Ardagna, 2010. "Large Changes in Fiscal Policy: Taxes versus Spending," NBER Chapters, in: Tax Policy and the Economy, Volume 24, pages 35-68 National Bureau of Economic Research, Inc.
  9. Daniel Leigh & Andrea Pescatori & Jaime Guajardo, 2011. "Expansionary Austerity New International Evidence," IMF Working Papers 11/158, International Monetary Fund.
  10. Perotti, Roberto, 1996. "Fiscal Consolidation in Europe: Composition Matters," American Economic Review, American Economic Association, American Economic Association, vol. 86(2), pages 105-10, May.
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Cited by:
  1. Panizza, Ugo & Presbitero, Andrea F., 2014. "Public debt and economic growth: Is there a causal effect?," Journal of Macroeconomics, Elsevier, Elsevier, vol. 41(C), pages 21-41.

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