Advanced Search
MyIDEAS: Login to save this paper or follow this series

Fiscal Consolidation: How Much, How Fast and by What Means?

Contents:

Author Info

  • Douglas Sutherland
  • Peter Hoeller
  • Rossana Merola

Abstract

The economic and financial crisis was the catalyst for a fiscal crisis that engulfs many OECD countries. Consolidating public finances in order to address the consequences of the crisis, underlying weaknesses and also future spending pressures creates important challenges. Fiscal consolidation requires choices to be made about how much consolidation is needed, how fast it should be implemented and which instruments should be used. Estimates of fiscal gaps suggest that substantial and sustained fiscal tightening will be needed in nearly all countries to bring debt down to prudent levels. However, given a weak global economy, implementing a large fiscal tightening could be particularly costly. Structuring consolidation packages to use instruments with low multipliers initially and enhancing the institutional framework for fiscal policy to lend greater credibility to the commitment to consolidate over time may help minimise the trade-offs with growth in the short run. In most countries there is scope to target spending programmes more effectively and eliminate distortions in taxation. Such measures, buttressed by structural reforms, such as to unsustainable pension systems, can underpin fiscal sustainability, while minimising the costs to long-run growth. Consolidation budgétaire : Quelle ampleur, quel rythme et quels moyens ? La crise économique et financière a servi de catalyseur à une crise budgétaire qui submerge de nombreux pays de l’OCDE. Assainir les finances publiques pour faire face aux conséquences de la crise, aux faiblesses sous-jacentes ainsi qu’aux pressions futures sur les dépenses publiques représente un défi majeur pour bon nombre de pays. La consolidation budgétaire implique des choix quant à l’ampleur de la consolidation nécessaire, au rythme auquel elle doit être mise en œuvre et aux moyens à utiliser. Sur la base d’estimations des écarts budgétaires, il semble qu’il faudra un resserrement budgétaire important et durable dans presque tous les pays pour ramener la dette à des niveaux prudents. Cependant, compte tenu de la faiblesse de l’économie mondiale, la mise en œuvre d’un vaste programme de restriction budgétaire pourrait être particulièrement coûteuse. Structurer les programmes de consolidation de façon à utiliser au départ des instruments à multiplicateurs faibles et, à terme, à améliorer le cadre institutionnel de la politique budgétaire afin de rendre plus crédible l’engagement à assainir les finances publiques pourrait aider à réduire au minimum les arbitrages avec la croissance à court terme. Dans la plupart des pays, il est possible de cibler plus efficacement les programmes de dépenses et d’éliminer les distorsions de la fiscalité. Ces mesures, étayées par des réformes structurelles telles que la réforme des systèmes de retraite, qui ne sont plus tenables, peuvent soutenir la viabilité budgétaire tout en réduisant au minimum les coûts pour la croissance à long terme.

Download Info

If 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.
File URL: http://dx.doi.org/10.1787/5k9bj10bz60t-en
Download Restriction: no

Bibliographic Info

Paper provided by OECD Publishing in its series OECD Economic Policy Papers with number 1.

as in new window
Length:
Date of creation: 12 Apr 2012
Date of revision:
Handle: RePEc:oec:ecoaab:1-en

Contact details of provider:
Postal: 2 rue Andre Pascal, 75775 Paris Cedex 16
Phone: 33-(0)-1-45 24 82 00
Fax: 33-(0)-1-45 24 85 00
Email:
Web page: http://www.oecd.org
More information through EDIRC

Related research

Keywords: fiscal consolidation; fiscal gaps;

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
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.:
as in new window
  1. Balazs Egert, 2012. "Fiscal Policy Reaction to the Cycle in the OECD: Pro- or Counter-Cyclical?," CESifo Working Paper Series 3777, CESifo Group Munich.
  2. Pablo Antolín & Alain de Serres & Christine de la Maisonneuve, 2004. "Long-Term Budgetary Implications of Tax-Favoured Retirement Plans," OECD Economics Department Working Papers 393, OECD Publishing.
  3. 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.
  4. Rossana Merola & Douglas Sutherland, 2012. "Fiscal Consolidation: Part 3. Long-Run Projections and Fiscal Gap Calculations," OECD Economics Department Working Papers 934, OECD Publishing.
  5. Carmen M. Reinhart & Kenneth S. Rogoff, 2010. "Growth in a Time of Debt," NBER Working Papers 15639, National Bureau of Economic Research, Inc.
  6. Carmen M. & M. Belen Sbrancia, 2011. "The Liquidation of Government Debt," Working Paper Series WP11-10, Peterson Institute for International Economics.
  7. Frankel, Jeffrey A., 2011. "Over-optimism in Forecasts by Official Budget Agencies and its Implications," Scholarly Articles 8705906, Harvard Kennedy School of Government.
  8. Robert E Hall & Charles I Jones, 2007. "The Value of Life and the Rise in Health Spending," The Quarterly Journal of Economics, MIT Press, vol. 122(1), pages 39-72, 02.
  9. Robert P. Hagemann, 2010. "Improving Fiscal Performance Through Fiscal Councils," OECD Economics Department Working Papers 829, OECD Publishing.
  10. Joaquim Oliveira Martins & Christine de la Maisonneuve, 2006. "The drivers of public expenditure on health and long-term care: An integrated approach," OECD Economic Studies, OECD Publishing, vol. 2006(2), pages 115-154.
  11. Margit Molnar, 2012. "Fiscal Consolidation: Part 5. What Factors Determine the Success of Consolidation Efforts?," OECD Economics Department Working Papers 936, OECD Publishing.
  12. Vincent Koen & Paul van den Noord, 2005. "Fiscal Gimmickry in Europe: One-Off Measures and Creative Accounting," OECD Economics Department Working Papers 417, OECD Publishing.
  13. Robert W.R. Price & Thai-Thanh Dang, 2011. "Adjusting Fiscal Balances for Asset Price Cycles," OECD Economics Department Working Papers 868, OECD Publishing.
  14. Sveinbjörn Blöndal & Simon Field & Nathalie Girouard, 2002. "Investment in Human Capital Through Post-Compulsory Education and Training: Selected Efficiency and Equity Aspects," OECD Economics Department Working Papers 333, OECD Publishing.
  15. Stephen Cecchetti & Madhusudan Mohanty & Fabrizio Zampolli, 2011. "The real effects of debt," BIS Working Papers 352, Bank for International Settlements.
Full references (including those not matched with items on IDEAS)

Citations

Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Gauche/Droite : La réalité de la hausse de la dette sous les différents gouvernements
    by contact@captaineconomics.fr (Le Captain') in Captain Economics on 2012-04-25 06:20:48
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Margit Schratzenstaller, 2012. "Between Consolidation and Growth: Federal Financial Framework 2013-2016, "Consolidation Package II" and Stability Programme," Austrian Economic Quarterly, WIFO, vol. 17(3), pages 187-206, September.
  2. Peter A. Schmid, 2013. "The destabilizing effect of company income taxation," Society and Economy, Akadémiai Kiadó, Hungary, vol. 35(3), pages 365-388, September.
  3. Caroline Klein & Robert W.R. Price & Andreas Wörgötter, 2013. "Improving the Fiscal Framework to Enhance Growth in an Era of Fiscal Consolidation in Slovakia," OECD Economics Department Working Papers 1018, OECD Publishing.
  4. Bergljot Barkbu & Jesmin Rahman & Rodrigo O. Valdés, 2012. "Fostering Growth in Europe Now," IMF Staff Discussion Notes 12/07, International Monetary Fund.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:oec:ecoaab:1-en. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.