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Assessing fiscal episodes

Author

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  • António Afonso
  • João Tovar Jalles

Abstract

In an OCDE panel, for the period 1970-2010, we assess the effects of fiscal consolidation episodes, with four different definitions. Our results reveal that lower final government consumption would increase private consumption in three out of the four approaches, when there is a fiscal consolidation, and the debt ratio is above the cross-country average. The change in the cyclically adjusted primary balance and the duration of the consolidation episode contribute for the success of the consolidation, and the opposite applies if the latter is more based on the revenue side. Finally, the effects of social transfers on private investment tend to be negative.

Suggested Citation

  • António Afonso & João Tovar Jalles, 2011. "Assessing fiscal episodes," Working Papers Department of Economics 2011/15, ISEG - Lisbon School of Economics and Management, Department of Economics, Universidade de Lisboa.
  • Handle: RePEc:ise:isegwp:wp152011
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    References listed on IDEAS

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    Cited by:

    1. Castro, Vítor, 2017. "The impact of fiscal consolidations on the functional components of government expenditures," Economic Modelling, Elsevier, vol. 60(C), pages 138-150.
    2. F. Heylen & A. Hoebeeck & T. Buyse, 2011. "Fiscal consolidation, institutions and institutional reform: a multivariate analysis of public debt dynamics," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 11/763, Ghent University, Faculty of Economics and Business Administration.
    3. António Afonso & João Tovar Jalles, 2017. "Fiscal Episodes and Market Power," Open Economies Review, Springer, vol. 28(2), pages 233-250, April.
    4. Giancarlo Corsetti & André Meier & Gernot J. Müller, 2012. "What determines government spending multipliers?," Economic Policy, CEPR;CES;MSH, vol. 27(72), pages 521-565, October.
    5. António Afonso & Luís Martins, 2016. "Monetary Developments and Expansionary Fiscal Consolidations: Evidence from the EMU," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 21(3), pages 247-265, July.
    6. Kimberly Beaton & Serhan Cevik & Reza Yousefi, 2017. "Smooth Operator: Remittances and Fiscal Shocks," IMF Working Papers 17/165, International Monetary Fund.
    7. Bi, Huixin & Shen, Wenyi & Yang, Shu-Chun S., 2016. "Debt-dependent effects of fiscal expansions," European Economic Review, Elsevier, vol. 88(C), pages 142-157.
    8. repec:kap:itaxpf:v:24:y:2017:i:3:d:10.1007_s10797-016-9428-x is not listed on IDEAS
    9. Ciminelli, Gabriele & Ernst, Ekkehard & Giuliodori, Massimo & Merola, Rossana, 2017. "The Composition Effects of Tax-Based Consolidations on Income Inequality," GLO Discussion Paper Series 25, Global Labor Organization (GLO).

    More about this item

    Keywords

    fiscal consolidation; non-Keynesian effects; panel data; logit Classification-C23; E21; E62; H5; H62;

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • 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
    • H5 - Public Economics - - National Government Expenditures and Related Policies
    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus

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