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Expansionary Fiscal Consolidations? An Appraisal of the Literature on Non-Keynesian Effects of Fiscal Policy and a Case Study for Austria

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  • Doris Prammer

    () (Oesterreichische Nationalbank)

Abstract

This paper reviews the key theoretical and empirical findings of the literature on non-Keynesian effects of fiscal policy, or “expansionary fiscal consolidations.” Specifically, it seeks to identify why the empirical evidence is rather ambiguous about the effects that fiscal contractions have on private consumption, investment, national saving and output. The empirical evidence surveyed in this paper is found to provide no clear support for the existence of expansionary fiscal consolidations. The safest conclusion seems to be that fiscal policy has lost some of its ability to stabilize the economy over the recent past. Austria's fiscal consolidation of 1995—1997, identified as expansionary by the European Commission, is found to have relied significantly on one-off measures.

Suggested Citation

  • Doris Prammer, 2004. "Expansionary Fiscal Consolidations? An Appraisal of the Literature on Non-Keynesian Effects of Fiscal Policy and a Case Study for Austria," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), issue 3, pages 34-52.
  • Handle: RePEc:onb:oenbmp:y:2004:i:3:b:3
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    File URL: https://www.oenb.at/dam/jcr:c476adcc-3bb8-42b4-bddc-6e00eb41194a/mop_20043_analyses3_tcm16-21309.pdf
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    References listed on IDEAS

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    10. Alan J. Auerbach, 2002. "Is there a role for discretionary fiscal policy?," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 109-150.
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    Citations

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    Cited by:

    1. European Commission, 2011. "Tax Reforms in EU Member States 2011: tax policy challenges for economic growth and fiscal sustainability," Taxation Papers 28, Directorate General Taxation and Customs Union, European Commission.
    2. Maria Neycheva, 2007. "Impact of Fiscal Policy on the Cumulative Production in the Bulgarian Economy," Economic Thought journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 3, pages 82-101.
    3. Coenen, Günter & Mohr, Matthias & Straub, Roland, 2008. "Fiscal consolidation in the euro area: Long-run benefits and short-run costs," Economic Modelling, Elsevier, vol. 25(5), pages 912-932, September.
    4. António Afonso & Luís Martins, 2016. "Monetary Developments and Expansionary Fiscal Consolidations: Evidence from the EMU," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 21(3), pages 247-265, July.
    5. Maria Neicheva, 2006. "Non-Keynesian Effects of Government Expenditure on Output in Bulgaria: An HP Filter Approach," Post-Communist Economies, Taylor & Francis Journals, vol. 18(1), pages 1-12.
    6. Robert Ambrisko & Vitezslav Augusta & Dana Hajkova & Petr Kral & Pavla Netusilova & Milan Rikovsky & Pavel Soukup, 2012. "Fiscal Discretion in the Czech Republic in 2001-2011: Has It Been Stabilizing?," Research and Policy Notes 2012/01, Czech National Bank, Research Department.
    7. Rosaria Rita Canale & Pasquale Foresti & Ugo Marani & Oreste Napolitano, 2008. "On keynesian effects of (apparent) non-keynesian fiscal policies," Politica economica, Società editrice il Mulino, issue 1, pages 5-46.
    8. Vlasov, S. & Ponomarenko, A., 2010. "The Role of Budget Policy under the Financial and Economic Crisis," Journal of the New Economic Association, New Economic Association, issue 7, pages 111-133.
    9. Neicheva, Maria, 2007. "Non-Keynesian effects of Government Spending: Some implications for the Stability and Growth Pact," MPRA Paper 5277, University Library of Munich, Germany.
    10. Josef Baumgartner & Serguei Kaniovski & Hans Pitlik, 2010. "Slow Recovery Following Severe Recession. Forecast of the Austrian Economy until 2014," WIFO Monatsberichte (monthly reports), WIFO, vol. 83(1), pages 47-59, January.

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    Keywords

    Fiscal Policy;

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