The Challenge of Debt Reduction during Fiscal Consolidation
AbstractStudies suggest that fiscal multipliers are currently high in many advanced economies. One important implication is that fiscal tightening could raise the debt ratio in the short term, as fiscal gains are partly wiped out by the decline in output. Although this effect is not long-lasting and debt eventually declines, it could be an issue if financial markets focus on the short-term behavior of the debt ratio, or if country authorities engage in repeated rounds of tightening in an effort to get the debt ratio to converge to the official target. We discuss whether these problems could be addressed by setting and monitoring debt targets in cyclically-adjusted terms.
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 13/67.
Date of creation: 08 Mar 2013
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:
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.:
- Alan J. Auerbach & Yuriy Gorodnichenko, 2011.
"Fiscal Multipliers in Recession and Expansion,"
NBER Working Papers
17447, National Bureau of Economic Research, Inc.
- Eric M. Leeper & Todd B. Walker & Shu-Chun Susan Yang, 2009.
"Fiscal Foresight and Information Flows,"
NBER Working Papers
14630, National Bureau of Economic Research, Inc.
- Reda, Cherif & Fuad, Hasanov, 2010. "Public Debt Dynamics and Debt Feedback," MPRA Paper 27918, University Library of Munich, Germany.
- Roberto Perotti, 2008.
"In Search of the Transmission Mechanism of Fiscal Policy,"
in: NBER Macroeconomics Annual 2007, Volume 22, pages 169-226
National Bureau of Economic Research, Inc.
- Roberto Perotti, 2007. "In Search of the Transmission Mechanism of Fiscal Policy," NBER Working Papers 13143, National Bureau of Economic Research, Inc.
- Forni, Lorenzo & Monteforte, Libero & Sessa, Luca, 2009.
"The general equilibrium effects of fiscal policy: Estimates for the Euro area,"
Journal of Public Economics,
Elsevier, vol. 93(3-4), pages 559-585, April.
- Luca Sessa & Libero Monteforte & Lorenzo Forni, 2007. "The general equilibrium effects of fiscal policy: estimates for the euro area," 2007 Meeting Papers 352, Society for Economic Dynamics.
- Lorenzo Forni & Libero Monteforte & Luca Sessa, 2007. "The general equilibrium effects of fiscal policy: estimates for the euro area," Temi di discussione (Economic working papers) 652, Bank of Italy, Economic Research and International Relations Area.
- Carlo Favero & Francesco Giavazzi, 2007.
"Debt and the Effects of Fiscal Policy,"
NBER Working Papers
12822, National Bureau of Economic Research, Inc.
- Carlo Favero & Francesco Giavazzi, 2007. "Debt and the effects of fiscal policy," Working Papers 07-4, Federal Reserve Bank of Boston.
- Carlo Favero & Francesco Giavazzi, 2007. "Debt and the effects of fiscal policy," Working Papers 317, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
- Favero, Carlo A & Giavazzi, Francesco, 2007. "Debt and the Effects of Fiscal Policy," CEPR Discussion Papers 6092, C.E.P.R. Discussion Papers.
- Favero, Carlo A. & Giavazzi, Francesco, 2009.
"How Large Are the Effects of Tax Changes?,"
CEPR Discussion Papers
7439, C.E.P.R. Discussion Papers.
- Carlo Favero & Francesco Giavazzi, 2009. "How large are the effects of tax changes?," Working Papers 350, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
- Carlo Favero & Francesco Giavazzi, 2009. "How large are the effects of tax changes?," NBER Working Papers 15303, National Bureau of Economic Research, Inc.
- Anja Baum & Marcos Poplawski-Ribeiro & Anke Weber, 2012. "Fiscal Multipliers and the State of the Economy," IMF Working Papers 12/286, International Monetary Fund.
- Nitika Bagaria & Dawn Holland & John Van Reenen, 2012.
"Fiscal consolidation during a depression,"
LSE Research Online Documents on Economics
47524, London School of Economics and Political Science, LSE Library.
- Hess Chung & Eric M. Leeper, 2007.
"What Has Financed Government Debt?,"
NBER Working Papers
13425, National Bureau of Economic Research, Inc.
- Henning Bohn, 1998. "The Behavior Of U.S. Public Debt And Deficits," The Quarterly Journal of Economics, MIT Press, vol. 113(3), pages 949-963, August.
- Eric M. Leeper & Todd B. Walker & Shu-Chun Susan Yang, 2011. "Foresight and Information Flows," NBER Working Papers 16951, National Bureau of Economic Research, Inc.
- Mthuli Ncube & Zuzana Brixiová, 2013. "Public Debt Sustainability in Africa: Building Resilience and Challenges Ahead," William Davidson Institute Working Papers Series wp1053, William Davidson Institute at the University of Michigan.
- Gabriela Lopes de Castro & Ricardo Mourinho Félix & Paulo Júlio & José R. Maria, 2013. "Fiscal multipliers in a small euro area economy: How big can they get in crisis times?," Working Papers w201311, Banco de Portugal, Economics and Research Department.
- Emanuele Baldacci & Sanjeev Gupta & Carlos Mulas-Granados, 2012. "Reassessing the fiscal mix for successful debt reduction," Economic Policy, CEPR & CES & MSH, vol. 27(71), pages 365-406, 07.
- JesÃºs Ferreiro & Carmen GÃ³mez & Felipe Serrano, 2013. "Mistakes in the Fiscal Policy in Spain before the Crisis," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 60(5), pages 577-592, September.
- Emanuele Baldacci & Sanjeev Gupta & Carlos Mulas-Granados, 2013. "Debt Reduction, Fiscal Adjustment, and Growth in Credit-Constrained Economies," IMF Working Papers 13/238, International Monetary Fund.
- repec:cge:warwcg:158 is not listed on IDEAS
- Miller, Marcus & Zhang, Lei, 2013. "Fiscal consolidation: Dr Pangloss meets Mr Keynes," CAGE Online Working Paper Series 159, Competitive Advantage in the Global Economy (CAGE).
- Jesper Jespersen, 2013. "The Euro: Why it Went Wrong and How to Get On?," Ensayos Económicos, Central Bank of Argentina, Economic Research Department, vol. 1(68), pages 23-42, June.
- Manos Matsaganis & Chrysa Leventi, 2014. "Distributive Effects of the Crisis and Austerity in Seven EU Countries," ImPRovE Working Papers 14/04, Herman Deleeck Centre for Social Policy, University of Antwerp.
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.