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ow Big Was the Effect of Budget Consolidation on the Australian Economy in the 1990s?

  • Lei Lei Song

    (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne)

  • John Freebairn

    ()

    (Department of Economics, The University of Melbourne)

This paper evaluates the effects of budget consolidation on the Australian economy in the 1990s by using a modified version of TRYM. By identifying the effects on long-term interest rates of the expected reduction in budget deficits in the 1996/97 financial year, the paper simulates the model for would-be impacts on the economy, had interest rates not fallen due to no budget consolidation. It is found that the program of budget consolidation did have a sizable impact on the economy, raising GDP by up to three quarters of a percentage point and reducing unemployment by 0.3 percentage points in two to three years.

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File URL: http://www.melbourneinstitute.com/downloads/working_paper_series/wp2004n30.pdf
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Paper provided by Melbourne Institute of Applied Economic and Social Research, The University of Melbourne in its series Melbourne Institute Working Paper Series with number wp2004n30.

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Length: 28 pages
Date of creation: Nov 2004
Date of revision:
Handle: RePEc:iae:iaewps:wp2004n30
Contact details of provider: Postal: Melbourne Institute of Applied Economic and Social Research, The University of Melbourne, Victoria 3010 Australia
Phone: +61 3 8344 2100
Fax: +61 3 8344 2111
Web page: http://www.melbourneinstitute.com/Email:


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  17. David Gruen & Adrian Pagan & Christopher Thompson, 1999. "The Phillips Curve in Australia," RBA Research Discussion Papers rdp1999-01, Reserve Bank of Australia.
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