Options for Fiscal Consolidation in the United Kingdom
AbstractThis paper examines the macroeconomic effects of different timing and composition of fiscal adjustment in the United Kingdom using the IMFâ€™s Global Fiscal Model. Early consolidation dampens aggregate demand in the short term, but increases output in the long term as smaller primary surpluses are needed as a result of lower interest payments. Reducing government transfers or current government spending provides larger gains than increasing taxes, in particular compared to raising corporate or personal income taxes. We show that these conclusions are robust under alternative behavioral assumptions and parameterizations. A reduction in global saving would make early consolidation more urgent from both cyclical and long-term perspectives. Finally, we show that tax reform aimed at increasing incentives to save could provide support to fiscal consolidation measures.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by International Monetary Fund in its series IMF Working Papers with number 06/89.
Date of creation: 01 Mar 2006
Date of revision:
Contact details of provider:
Postal: International Monetary Fund, Washington, DC USA
Phone: (202) 623-7000
Fax: (202) 623-4661
Web page: http://www.imf.org/external/pubind.htm
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Dirk Muir & Douglas Laxton & Dennis P. J. Botman & Andrei Romanov, 2006. "A New-Open-Economy Macro Model for Fiscal Policy Evaluation," IMF Working Papers 06/45, International Monetary Fund.
- Douglas Laxton & Paolo Pesenti, 2003.
"Monetary Rules for Small, Open, Emerging Economies,"
NBER Working Papers
9568, National Bureau of Economic Research, Inc.
- Laxton, Douglas & Pesenti, Paolo, 2003. "Monetary rules for small, open, emerging economies," Journal of Monetary Economics, Elsevier, vol. 50(5), pages 1109-1146, July.
- Dennis P. J. Botman & Papa M'B. P. N'Diaye & Hali J. Edison, 2007.
"Strategies for Fiscal Consolidation in Japan,"
IMF Working Papers
07/37, International Monetary Fund.
- Murtaza H. Syed & Michael Skaarup & Tarhan Feyzioglu, 2008. "Addressing Korea's Long-Term Fiscal Challenges," IMF Working Papers 08/27, International Monetary Fund.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jim Beardow) or (Hassan Zaidi).
If references are entirely missing, you can add them using this form.