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Keynesian, Non-Keynesian or No Effects of Fiscal Policy Changes? The EMU Case

  • Bas van Aarle
  • Harry (ed.) Garretsen

This paper studies the experiences with fiscal adjustments in the EuropeanUnion (EU) countries during the transition period to the Economic andMonetary Union (EMU). Using several approaches suggested in the literatureon fiscal adjustments and their macroeconomic effects and in the literatureon EMU, we analyze the effects of the fiscal adjustments during this periodon private consumption. Thereby, we also take the specific context of thetransition towards EMU explicitly into consideration. At best mixed evidencefor the presence of non-linearities in the relation between fiscal adjustmentsand private spending is obtained. There is no clear-cut evidence for thehypothesis of “expansionary fiscal contractions” which may have alleviatedthe burden from fiscal consolidation in the EMU case. The sensitivity of theresults for a number of factors is also checked.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2001/wp-cesifo-2001-10/cesifo_wp570.pdf
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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 570.

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Date of creation: 2001
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Handle: RePEc:ces:ceswps:_570
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  1. Alesina, Alberto & Perotti, Roberto, 1995. "Taxation and redistribution in an open economy," European Economic Review, Elsevier, vol. 39(5), pages 961-979, May.
  2. Olivier Jean Blanchard, 1990. "Suggestions for a New Set of Fiscal Indicators," OECD Economics Department Working Papers 79, OECD Publishing.
  3. Jürgen von Hagen & Andrew Hughes Hallett & Rolf Strauch, 2001. "Budgetary Consolidation in EMU," European Economy - Economic Papers 148, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
  4. Alberto Alesina & Roberto Perotti, 1994. "The Welfare State and Competitiveness," NBER Working Papers 4810, National Bureau of Economic Research, Inc.
  5. Perotti, Roberto & Alesina, Alberto, 1997. "The Welfare State and Competitiveness," Scholarly Articles 4553027, Harvard University Department of Economics.
  6. Giavazzi, Francesco & Pagano, Marco, 1995. "Non-Keynesian Effects of Fiscal Policy Changes: International Evidence and the Swedish Experience," CEPR Discussion Papers 1284, C.E.P.R. Discussion Papers.
  7. Alberto Alesina & Roberto Perotti, 1995. "Fiscal Expansions and Fiscal Adjustments in OECD Countries," NBER Working Papers 5214, National Bureau of Economic Research, Inc.
  8. Giuseppe Bertola & Allan Drazen, 1991. "Trigger Points and Budget Cuts: Explaining the Effects of Fiscal Austerity," NBER Working Papers 3844, National Bureau of Economic Research, Inc.
  9. Perotti, Roberto & Strauch, Rolf & von Hagen, Jürgen, 1997. "Sustainability of Public Finances," CEPR Discussion Papers 1781, C.E.P.R. Discussion Papers.
  10. Alan Sutherland, . "Fiscal Crises and Aggregate Demand: Can High Public Debt Reverse the Effects of Fiscal Policy?," Discussion Papers 95/17, Department of Economics, University of York.
  11. C. John McDermott & Robert F. Wescott, 1996. "An Empirical Analysis of Fiscal Adjustments," IMF Staff Papers, Palgrave Macmillan, vol. 43(4), pages 725-753, December.
  12. Roberto Perotti, 1999. "Fiscal Policy In Good Times And Bad," The Quarterly Journal of Economics, MIT Press, vol. 114(4), pages 1399-1436, November.
  13. Francesco P. Mongelli, 1996. "The Effects of the European Economic and Monetary Union (EMU)on National Fiscal Sustainability," IMF Working Papers 96/72, International Monetary Fund.
  14. De Bandt, Olivier & Mongelli, Francesco Paolo, 2000. "Convergence of fiscal policies in the euro area," Working Paper Series 0020, European Central Bank.
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