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The design of fiscal adjustments

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  • Alberto F. Alesina
  • Silvia Ardagna

Abstract

This paper offers three results. First, in line with the previous literature, we confirm that fiscal adjustments based mostly on the spending side are less likely to be reversed. Second, spending based fiscal adjustments have caused smaller recessions than tax based fiscal adjustments. Finally, certain combinations of policies have made it possible for spending based fiscal adjustments to be associated with growth in the economy even on impact rather than with a recession. Thus, expansionary fiscal adjustments are possible.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 18423.

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Date of creation: Sep 2012
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Publication status: published as The Design of Fiscal Adjustments , Alberto Alesina, Silvia Ardagna. in Tax Policy and the Economy, Volume 27 , Brown. 2013
Handle: RePEc:nbr:nberwo:18423

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  1. Alesina, Alberto F & Favero, Carlo A. & Giavazzi, Francesco, 2012. "The output effect of fiscal consolidations," CEPR Discussion Papers, C.E.P.R. Discussion Papers 9105, C.E.P.R. Discussion Papers.
  2. Christina D. Romer & David H. Romer, 1989. "Does Monetary Policy Matter? A New Test in the Spirit of Friedman and Schwartz," NBER Working Papers 2966, National Bureau of Economic Research, Inc.
  3. Francesco Daveri & Guido Tabellini, . "Unemployment, Growth and Taxation in Industrial Countries," Working Papers, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University 122, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  4. Robert F. Westcott & C. John McDermott, 1996. "An Empirical Analysis of Fiscal Adjustments," IMF Working Papers, International Monetary Fund 96/59, International Monetary Fund.
  5. Ardagna, Silvia, 2007. "Fiscal Policy in Unionized Labor Markets," Scholarly Articles 2580048, Harvard University Department of Economics.
  6. Andrea Pescatori & Daniel Leigh & Jaime Guajardo & Pete Devries, 2011. "A New Action-Based Dataset of Fiscal Consolidation," IMF Working Papers, International Monetary Fund 11/128, International Monetary Fund.
  7. Francesco Giavazzi & Marco Pagano, 1990. "Can Severe Fiscal Contractions be Expansionary? Tales of Two Small European Countries," NBER Working Papers 3372, National Bureau of Economic Research, Inc.
  8. Schiantarelli, Fabio & Perotti, Roberto & Ardagna, Silvia & Alesina, Alberto, 2002. "Fiscal Policy, Profits, and Investment," Scholarly Articles 4685103, Harvard University Department of Economics.
  9. repec:aei:rpaper:26118 is not listed on IDEAS
  10. Ardagna, Silvia, 2007. "Fiscal policy in unionized labor markets," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 31(5), pages 1498-1534, May.
  11. repec:hrv:faseco:3353756 is not listed on IDEAS
  12. Ardagna, Silvia, 2004. "Fiscal Stabilizations: When Do They Work and Why," Scholarly Articles 2580047, Harvard University Department of Economics.
  13. von Hagen, Jurgen & Strauch, Rolf R, 2001. " Fiscal Consolidations: Quality, Economic Conditions, and Success," Public Choice, Springer, Springer, vol. 109(3-4), pages 327-46, December.
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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Monetary or fiscal stimulus can help only if unemployment is cyclical; otherwise, if unemployment is structural expansionary policies will lead only to inflation. Careful recent analyses indicate that unemployment is mainly cyclical in the US
    by Blog Admin in British Politics and Policy at LSE on 2012-10-24 16:00:33
  2. Given the enormity of the short- and long-run fiscal challenges facing the US, the lack of policy detail from both presidential candidates is disappointing
    by Blog Admin in British Politics and Policy at LSE on 2012-10-25 13:00:36
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Cited by:
  1. T. Buyse & F. Heylen, 2012. "Leaving the empirical (battle)ground: Output and welfare effects of fiscal consolidation in general equilibrium," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium, Ghent University, Faculty of Economics and Business Administration 12/826, Ghent University, Faculty of Economics and Business Administration.
  2. Philip R. Lane, 2013. "Growth and Adjustment Challenge for the Euro Area," The Institute for International Integration Studies Discussion Paper Series, IIIS iiisdp427, IIIS.
  3. Ludger Schuknecht, 2013. "Has Public Insurance Gone Too Far?," CESifo Working Paper Series 4217, CESifo Group Munich.
  4. Haffert, Lukas & Mehrtens, Philip, 2013. "From austerity to expansion? Consolidation, budget surpluses, and the decline of fiscal capacity," MPIfG Discussion Paper, Max Planck Institute for the Study of Societies 13/16, Max Planck Institute for the Study of Societies.
  5. Agnès Bénassy-Quéré & Guillaume Roussellet, 2014. "Fiscal Sustainability in the Presence of Systemic Banks: the Case of EU countries," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers), HAL hal-00825256, HAL.
  6. Riccardo Fiorentini & Guido Montani, 2013. "Beyond Austerity A European Recovery Policy Is Feasible," Working Papers, University of Verona, Department of Economics 06/2013, University of Verona, Department of Economics.
  7. Stegarescu, Dan, 2013. "Does expenditure composition influence the debt level? Evidence from German federal states," Discussion Papers, Deutsche Bundesbank, Research Centre 52/2013, Deutsche Bundesbank, Research Centre.
  8. Roland Döhrn & György Barabas & Heinz Gebhardt & Tobias Kitlinksi & Martin Micheli & Simeon Vosen & Lina Zwick, 2013. "Die wirtschaftliche Entwicklung im Inland: Binnennachfrage trägt Aufschwung," RWI Konjunkturbericht, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, pages 64, 09.
  9. Borys, Paweł & Ciżkowicz, Piotr & Rzońca, Andrzej, 2013. "Panel data evidence on effects of fiscal impulses in the EU New Member States," MPRA Paper 48243, University Library of Munich, Germany.
  10. Heylen, Freddy & Hoebeeck, Annelies & Buyse, Tim, 2013. "Government efficiency, institutions, and the effects of fiscal consolidation on public debt," European Journal of Political Economy, Elsevier, Elsevier, vol. 31(C), pages 40-59.
  11. Niamh Hardiman, 2013. "Rethinking the political economy of fiscal consolidation in two recessions in Ireland," Working Papers, Geary Institute, University College Dublin 201316, Geary Institute, University College Dublin.
  12. Georgia Kaplanoglou & Vassilis T. Rapanos & loanna C. Bardakas, 2014. "Does fairness matter for the success of fiscal consolidation?," Working Papers, Bank of Greece 180, Bank of Greece.
  13. Manos Matsaganis & Chrysa Leventi, 2014. "Distributive Effects of the Crisis and Austerity in Seven EU Countries," ImPRovE Working Papers, Herman Deleeck Centre for Social Policy, University of Antwerp 14/04, Herman Deleeck Centre for Social Policy, University of Antwerp.
  14. Luiz de Mello, 2013. "What Can Fiscal Policy Do in the Current Recession? A Review of Recent Literature and Policy Options," Hacienda Pública Española, IEF, IEF, vol. 204(1), pages 113-139, March.

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