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Revenue- versus spending-based fiscal consolidation announcements: follow-up, multipliers and confidence

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  • Beetsma, Roel
  • Furtuna, Oana
  • Giuliodori, Massimo
  • Mumtaz, Haroon

Abstract

Based on a newly-constructed narrative dataset on fiscal consolidation announcements for thirteen EU countries over the period 1978-2013, a panel VAR analysis shows that revenue-based consolidation announcements affect economic activity more adversely than do spending-based announcements. The combination of larger actual follow-up and larger revenue multipliers helps to explain the difference. The unique nature of our dataset allows to control for fiscal anticipation and the confidence channel following the announcements. The confidence channel has an important role in explaining the difference in the multipliers following the two types of announcements.

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  • Beetsma, Roel & Furtuna, Oana & Giuliodori, Massimo & Mumtaz, Haroon, 2017. "Revenue- versus spending-based fiscal consolidation announcements: follow-up, multipliers and confidence," CEPR Discussion Papers 12133, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:12133
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    2. Kate Ivory & Eddie Casey & Niall Conroy, 2020. "Ireland’s Fiscal Spending Multipliers," The Economic and Social Review, Economic and Social Studies, vol. 51(1), pages 133-172.

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    More about this item

    Keywords

    Fiscal consolidation announcements; Follow-up; Fiscal multipliers; Confidence; Panel vector auto-regression; Narrative identification;
    All these keywords.

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H5 - Public Economics - - National Government Expenditures and Related Policies

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