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The design of fiscal adjustments

  • Alberto F. Alesina
  • Silvia Ardagna

This paper offers three results. First, in line with the previous literature, we confirm that fiscal adjustments based mostly on the spending side are less likely to be reversed. Second, spending based fiscal adjustments have caused smaller recessions than tax based fiscal adjustments. Finally, certain combinations of policies have made it possible for spending based fiscal adjustments to be associated with growth in the economy even on impact rather than with a recession. Thus, expansionary fiscal adjustments are possible.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 18423.

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Date of creation: Sep 2012
Date of revision:
Publication status: published as The Design of Fiscal Adjustments , Alberto Alesina, Silvia Ardagna. in Tax Policy and the Economy, Volume 27 , Brown. 2013
Handle: RePEc:nbr:nberwo:18423
Note: POL
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  1. Ardagna, Silvia, 2007. "Fiscal policy in unionized labor markets," Journal of Economic Dynamics and Control, Elsevier, vol. 31(5), pages 1498-1534, May.
  2. Romer, Christina D. & Romer, David H., 1989. "Does Monetary Policy Matter? A New Test in the Spirit of Friedman and Schwartz," Department of Economics, Working Paper Series qt5h07k8vf, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  3. 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.
  4. Francesco Giavazzi & Marco Pagano, 1990. "Can Severe Fiscal Contractions Be Expansionary? Tales of Two Small European Countries," NBER Chapters, in: NBER Macroeconomics Annual 1990, Volume 5, pages 75-122 National Bureau of Economic Research, Inc.
  5. Alesina, Alberto F & Ardagna, Silvia & Perotti, Roberto & Schiantarelli, Fabio, 1999. "Fiscal Policy, Profits and Investment," CEPR Discussion Papers 2250, C.E.P.R. Discussion Papers.
  6. Ardagna, Silvia, 2004. "Fiscal Stabilizations: When Do They Work and Why," Scholarly Articles 2580047, Harvard University Department of Economics.
  7. Alberto Alesina & Carlo Favero & Francesco Giavazzi, 2013. "The output effect of fiscal consolidations," Working Papers 478, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  8. repec:hrv:faseco:3353756 is not listed on IDEAS
  9. Alesina, Alberto Francesco & Ardagna, Silvia, 2010. "Large Changes in Fiscal Policy: Taxes versus Spending," Scholarly Articles 22801844, Harvard University Department of Economics.
  10. Francesco Daveri & Guido Tabellini, 2000. "Unemployment, growth and taxation in industrial countries," Economic Policy, CEPR;CES;MSH, vol. 15(30), pages 47-104, 04.
  11. Kevin A. Hassett & Andrew G. Biggs & Matthew H. Jensen, 2010. "A Guide for Deficit Reduction in the United States Based on Historical Consolidations That Worked," Working Papers 16693, American Enterprise Institute.
  12. Ardagna, Silvia, 2007. "Fiscal Policy in Unionized Labor Markets," Scholarly Articles 2580048, Harvard University Department of Economics.
  13. repec:aei:rpaper:26118 is not listed on IDEAS
  14. von Hagen, Jurgen & Strauch, Rolf R, 2001. " Fiscal Consolidations: Quality, Economic Conditions, and Success," Public Choice, Springer, vol. 109(3-4), pages 327-46, December.
  15. Andrea Pescatori & Daniel Leigh & Jaime Guajardo & Pete Devries, 2011. "A New Action-Based Dataset of Fiscal Consolidation," IMF Working Papers 11/128, International Monetary Fund.
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