Fiscal Adjustments: Determinants and Macroeconomic Consequences
AbstractThe paper analyzes the determinants of success of recent fiscal consolidations in the OECD countries as well as the short-run and long-run effects of fiscal adjustments on economic activity by looking at fourteen case studies, panel data for OECD countries, and the results of simulations using a non-Ricardian multi-country dynamic general equilibrium model. The study finds that while fiscal consolidations tend to have short-run contractionary effects, they can be expansionary in the long run, provided that they do not rely excessively on cuts in productive government expenditure. They can also create positive spillover effects for the rest of the world.
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 07/178.
Date of creation: 01 Jul 2007
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
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-09-16 (All new papers)
- NEP-CBA-2007-09-16 (Central Banking)
- NEP-MAC-2007-09-16 (Macroeconomics)
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.:
- Alberto Alesina & Silvia Ardagna & Francesco Trebbi, 2006.
"Who adjusts and when? On the political economy of reforms,"
Harvard Institute of Economic Research Working Papers
2108, Harvard - Institute of Economic Research.
- Alberto Alesina & Silvia Ardagna & Francesco Trebbi, 2006. "Who Adjusts and When? On the Political Economy of Reforms," NBER Working Papers 12049, National Bureau of Economic Research, Inc.
- Lambertini Luisa & Tavares José A, 2005. "Exchange Rates and Fiscal Adjustments: Evidence from the OECD and Implications for the EMU," The B.E. Journal of Macroeconomics, De Gruyter, vol. 5(1), pages 1-30, December.
- Ashoka Mody & Stefania Fabrizio, 2006.
"Can Budget Institutions Counteract Political Indiscipline?,"
IMF Working Papers
06/123, International Monetary Fund.
- Stefania Fabrizio & Ashoka Mody, 2006. "Can budget institutions counteract political indiscipline?," Economic Policy, CEPR & CES & MSH, vol. 21(48), pages 689-739, October.
- C. John McDermott & Robert F. Wescott, 1996.
"An Empirical Analysis of Fiscal Adjustments,"
IMF Staff Papers,
Palgrave Macmillan, vol. 43(4), pages 725-753, December.
- Douglas Laxton & Michael Kumhof, 2007.
"A Party without a Hangover? On the Effects of U.S. Government Deficits,"
IMF Working Papers
07/202, International Monetary Fund.
- Douglas Laxton & Michael Kumhof, 2007. "A Party without a Hangover? On the Effects of U.S. Government Deficits," 2007 Meeting Papers 676, Society for Economic Dynamics.
- Giavazzi, Francesco & Jappelli, Tullio & Pagano, Marco, 2000.
"Searching for non-linear effects of fiscal policy: Evidence from industrial and developing countries,"
European Economic Review,
Elsevier, vol. 44(7), pages 1259-1289, June.
- Giavazzi, Francesco & Jappelli, Tullio & Pagano, Marco, 2000. "Searching for Non-Linear Effects of Fiscal Policy: Evidence from Industrial and Developing Countries," CEPR Discussion Papers 2374, C.E.P.R. Discussion Papers.
- Francesco Giavazzi & Tullio Jappelli & Marco Pagano, 2000. "Searching for Non-Linear Effects of Fiscal Policy: Evidence from Industrial and Developing Countries," NBER Working Papers 7460, National Bureau of Economic Research, Inc.
- Alberto Alesina & Roberto Perotti, 1995. "Fiscal Expansions and Fiscal Adjustments in OECD Countries," NBER Working Papers 5214, National Bureau of Economic Research, Inc.
- repec:fth:coluec:754 is not listed on IDEAS
- Hauptmeier, Sebastian & Heipertz, Martin & Schuknecht, Ludger, 2006.
"Expenditure reform in industrialised countries: a case study approach,"
Working Paper Series
0634, European Central Bank.
- Sebastian Hauptmeier & Martin Heipertz & Ludger Schuknecht, 2007. "Expenditure Reform in Industrialised Countries: A Case-Study Approach," Fiscal Studies, Institute for Fiscal Studies, vol. 28(3), pages 293-342, 09.
- Hauptmeier, Sebastian & Heipertz, Martin & Schuknecht, Ludger, 2006. "Expenditure reform in industralised countries: a case study approach," ZEW Discussion Papers 06-50, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
- Mark A. Horton & George C. Tsibouris & Wojciech Maliszewski & Mark J Flanagan, 2006. "Experience with Large Fiscal Adjustments," IMF Occasional Papers 246, International Monetary Fund.
- Shang-Jin Wei & Irina Tytell, 2004. "Does Financial Globalization Induce Better Macroeconomic Policies?," IMF Working Papers 04/84, International Monetary Fund.
- Gleich, Holger, 2003. "Budget institutions and fiscal performance in Central and Eastern European countries," Working Paper Series 0215, European Central Bank.
- Tabellini, Guido, 1986. "Money, debt and deficits in a dynamic game," Journal of Economic Dynamics and Control, Elsevier, vol. 10(4), pages 427-442, December.
- Julia Darby & V. Anton Muscatelli & Graeme Roy, 2004.
"Fiscal Consolidation And Decentralisation: A Tale Of Two Tiers,"
2004_2, Business School - Economics, University of Glasgow.
- Julia Darby & V. Anton Muscatelli & Graeme Roy, 2005. "Fiscal consolidation and decentralisation: a tale of two tiers," Fiscal Studies, Institute for Fiscal Studies, vol. 26(2), pages 169-195, June.
- Claude Giorno & Pete Richardson & Deborah Roseveare & Paul van den Noord, 1995. "Estimating Potential Output, Output Gaps and Structural Budget Balances," OECD Economics Department Working Papers 152, OECD Publishing.
- von Hagen, Jurgen & Strauch, Rolf R, 2001. " Fiscal Consolidations: Quality, Economic Conditions, and Success," Public Choice, Springer, vol. 109(3-4), pages 327-46, December.
- Nathalie Girouard & Christophe André, 2005. "Measuring Cyclically-adjusted Budget Balances for OECD Countries," OECD Economics Department Working Papers 434, OECD Publishing.
- Taimur Baig & Abdul Abiad, 2005. "Underlying Factors Driving Fiscal Effort in Emerging Market Economies," IMF Working Papers 05/106, International Monetary Fund.
- Alt, James E. & Lassen, David Dreyer, 2006. "Fiscal transparency, political parties, and debt in OECD countries," European Economic Review, Elsevier, vol. 50(6), pages 1403-1439, August.
- Sebastian Dellepiane & Niamh Hardiman, 2012. "Fiscal Politics In Time: Pathways to Fiscal Consolidation, 1980-2012," Working Papers 201228, Geary Institute, University College Dublin.
- Werner Schule, 2010. "The Potential Contribution of Fiscal Policy to Rebalancing and Growth in New Zealand," IMF Working Papers 10/128, International Monetary Fund.
- Niamh Hardiman, 2013. "Rethinking the political economy of fiscal consolidation in two recessions in Ireland," Working Papers 201316, Geary Institute, University College Dublin.
- International Monetary Fund, 2010. "Post-Crisis Fiscal Policy Priorities for the ASEAN-5," IMF Working Papers 10/252, International Monetary Fund.
- Papageorgiou, Dimitris, 2012. "Fiscal policy reforms in general equilibrium: The case of Greece," Journal of Macroeconomics, Elsevier, vol. 34(2), pages 504-522.
- Athanasios Tagkalakis, 2009. "Fiscal adjustments: do labor and product market institutions matter?," Public Choice, Springer, vol. 139(3), pages 389-411, June.
- Charles Amo Yartey & Machiko Narita & Garth Peron Nicholls & Joel Chiedu Okwuokei, 2012. "The Challenges of Fiscal Consolidation and Debt Reduction in the Caribbean," IMF Working Papers 12/276, International Monetary Fund.
- Olivier Basdevant, 2012. "Fiscal Policies and Rules in the Face of Revenue Volatility Within Southern Africa Customs Union Countries (SACU)," IMF Working Papers 12/93, International Monetary Fund.
- Alberto F. Alesina & Dorian Carloni & Giampaolo Lecce, 2011.
"The Electoral Consequences of Large Fiscal Adjustments,"
NBER Working Papers
17655, National Bureau of Economic Research, Inc.
- Alberto Alesina & Dorian Carloni & Giampaolo Lecce, 2012. "The Electoral Consequences of Large Fiscal Adjustments," NBER Chapters, in: Fiscal Policy after the Financial Crisis, pages 531-570 National Bureau of Economic Research, Inc.
- Salvador Barrios & Sven Langedijk & Lucio Pench, 2010. "EU fiscal consolidation after the financial crisis. Lessons from past experiences," European Economy - Economic Papers 418, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.
- Luis-Felipe Zanna & Olivier Basdevant & Susan Yang & GeneviÃ¨ve Verdier & Joannes Mongardini & Borislava Mircheva & Dalmacio Benicio, 2011. "The Design of Fiscal Adjustment Strategies in Botswana, Lesotho, Namibia, and Swaziland," IMF Working Papers 11/266, International Monetary Fund.
- Sebastian Dellepiane & Niamh Hardiman, 2012. "The New Politics of Austerity: Fiscal Responses to the Economic Crisis in Ireland and Spain," Working Papers 201207, Geary Institute, University College Dublin.
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.