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The impact of fiscal austerity in the Eurozone

Listed author(s):
  • Gennaro Zezza

    (Università di Cassino)

This paper presents a framework to assess the likely impact of fiscal austerity in the Euro area, as a response to the turmoil in the financial markets. We provide some evidence on the sequence of events which generated public deficits and debts, and show that rising debts and deficits were the outcome of the external shock which hit the European economies from 2007 onwards, given the institutional setting, rather than the cause. After reviewing the theory supporting austerity as a solution to the crisis, we discuss the macroeconomics of austerity with the help of a stock-flow-consistent accounting structure in the context of a Keynesian–Kaleckian approach.

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File URL: http://www.elgaronline.com/view/journals/roke/0-1/roke.2012.01.03.xml
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Article provided by Edward Elgar Publishing in its journal Review of Keynesian Economics.

Volume (Year): 1 (2012)
Issue (Month): 0 ()
Pages: 37-54

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Handle: RePEc:elg:rokejn:v:0:y:2012:i:1:p37-54
Contact details of provider: Web page: http://www.elgaronline.com/roke

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  1. Roberto Perotti, 2012. "The "Austerity Myth": Gain without Pain?," NBER Chapters,in: Fiscal Policy after the Financial Crisis, pages 307-354 National Bureau of Economic Research, Inc.
  2. Barro, Robert J, 1974. "Are Government Bonds Net Wealth?," Journal of Political Economy, University of Chicago Press, vol. 82(6), pages 1095-1117, Nov.-Dec..
  3. Wynne Goldey & Marc Lavoie, 2007. "Fiscal policy in a stock-flow consistent (SFC) model," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 30(1), pages 79-100, October.
  4. Francesco Giavazzi & Marco Pagano, 1990. "Can Severe Fiscal Contractions Be Expansionary? Tales of Two Small European Countries," NBER Chapters,in: NBER Macroeconomics Annual 1990, Volume 5, pages 75-122 National Bureau of Economic Research, Inc.
  5. Daniel Leigh & Andrea Pescatori & Jaime Guajardo, 2011. "Expansionary Austerity New International Evidence," IMF Working Papers 11/158, International Monetary Fund.
  6. Olivier Blanchard, 2009. "The State of Macro," Annual Review of Economics, Annual Reviews, vol. 1(1), pages 209-228, 05.
  7. Giancarlo Corsetti & André Meier & Gernot J. Müller, 2012. "What determines government spending multipliers?," Economic Policy, CEPR;CES;MSH, vol. 27(72), pages 521-565, October.
  8. Roberto Perotti, 2011. "The "Austerity Myth": Gain without Pain?," Working Papers 430, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  9. Jonathan A. Parker, 2011. "On Measuring the Effects of Fiscal Policy in Recessions," Journal of Economic Literature, American Economic Association, vol. 49(3), pages 703-718, September.
  10. Gennaro Zezza, 2009. "Fiscal policy and the economics of financial balances," European Journal of Economics and Economic Policies: Intervention, Edward Elgar Publishing, vol. 6(2), pages 289-310.
  11. Valerie A. Ramey, 2011. "Can Government Purchases Stimulate the Economy?," Journal of Economic Literature, American Economic Association, vol. 49(3), pages 673-685, September.
  12. Perotti, Roberto, 2011. "The "Austerity Myth": Gain without Pain?," CEPR Discussion Papers 8658, C.E.P.R. Discussion Papers.
  13. Pavlina R. Tcherneva, 2010. "Fiscal Policy: The Wrench in the New Economic Consensus," International Journal of Political Economy, M.E. Sharpe, Inc., vol. 39(3), pages 24-44, October.
  14. Roberto Perotti, 2011. "The "Austerity myth": Gain Without Pain?," BIS Working Papers 362, Bank for International Settlements.
  15. Thomas I. Palley, 2012. "The simple macroeconomics of fiscal austerity: Public debt,deficits and deficit caps," European Journal of Economics and Economic Policies: Intervention, Edward Elgar Publishing, vol. 9(1), pages 91-108.
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