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The impact of fiscal consolidation on economic growth. An illustration for the Spanish economy based on a general equilibrium model

Author Info

Listed author(s):
  • Pablo Hernández de Cos

    ()

    (Banco de España)

  • Carlos Thomas

    ()

    (Banco de España)

Abstract

This study illustrates the effects of different fiscal consolidation measures on economic activity through simulations performed with a general equilibrium model calibrated to the Spanish economy. Overall, our results show that fiscal consolidation has short-run costs but sizable long-run benefits in terms of growth. Regarding the short-run costs, their magnitude depends crucially on the presence of confidence effects due to the consolidation process, which tend to reduce the value of fiscal multipliers

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File URL: http://www.bde.es/f/webbde/SES/Secciones/Publicaciones/PublicacionesSeriadas/DocumentosOcasionales/12/Fich/do1205.pdf
File Function: First version, May 2012
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Paper provided by Banco de España & Occasional Papers Homepage in its series Occasional Papers with number 1205.

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Length: 27 pages
Date of creation: May 2012
Handle: RePEc:bde:opaper:1205
Contact details of provider: Web page: http://www.bde.es/

Web page: http://www.bde.es/bde/en/secciones/informes/Publicaciones_se/Documentos_Ocasi/
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Keywords: Fiscal consolidation; general equilibrium; fiscal multipliers; confidence effects;

Find related papers by JEL classification:

  • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
  • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models

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Cited by:

  1. Thomas Warmedinger & Cristina Checherita-Westphal & Pablo Hernández de Cos, 2015. "Fiscal Multipliers and Beyond," Hacienda Pública Española, IEF, vol. 215(4), pages 139-168, December.
  2. repec:ecb:ecbops:2011162 is not listed on IDEAS

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