Expansionary Fiscal Consolidations? An Appraisal of the Literature on Non-Keynesian Effects of Fiscal Policy and a Case Study for Austria
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.
Volume (Year): (2004)
Issue (Month): 3 ()
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