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Fiscal Consolidation: Part 4. Case Studies of Large Fiscal Consolidation Episodes

  • Hansjörg Blöchliger
  • Dae-Ho Song
  • Douglas Sutherland

This paper provides an analysis of large and sustained fiscal consolidation episodes in OECD countries implemented between 1980 and 2000. It reviews how fiscal policy variables evolved during these episodes, how consolidation was influenced by the wider economic environment, and how the political economy side helped trigger and sustain consolidation efforts. Results suggest that successful consolidation – as measured by deficit reduction and debt stabilisation or decline – was driven by spending cuts and to a lesser extent by revenue increases. Most episodes started on a basis of improving competitiveness following currency depreciation and, in turn, favourable growth prospects, closing output gaps and – with some lag – falling unemployment. Interest rates started to decline two years after consolidation had started, suggesting that it took some time to earn credibility. With regard to political economy, most consolidation episodes were implemented shortly after an election. More than half of the governments that had started consolidation were re-elected, and some even strengthened consolidation efforts after then. In some cases, an incoming government of a different political colour pursued consolidation. Consolidation budgétaire : Partie 4. Études de cas de redressements budgétaires passés de grande envergure Ce document analyse les phases antérieures de corrections budgétaires fortes et durables dans des pays de l’OCDE intervenues entre 1980 et 2000. Il examine l’évolution des variables de la politique budgétaire au cours de ces phases, l’influence de l’environnement économique global sur le redressement budgétaire et le rôle des considérations d’économie politique dans le déclenchement et le maintien des efforts d’assainissement. Les résultats laissent penser qu’un programme de redressement réussi (réduction du déficit et stabilisation ou réduction de la dette) repose sur une contraction des dépenses et, dans une moindre mesure, une augmentation des recettes. La plupart des corrections ont été amorcées alors que la compétitivité s’améliorait à la suite d’une dépréciation de la monnaie, induisant des perspectives de croissance plus favorables, une réduction des écarts de production et, avec un certain décalage, un recul du chômage. Les taux d’intérêt ont commencé à baisser deux ans après le début de la correction, ce qui montre qu’il faut un certain temps pour acquérir une crédibilité. S’agissant d’économie politique, la plupart des corrections ont été engagées peu après une élection. Plus de la moitié des gouvernements qui avaient amorcé un resserrement ont été réélus et certains l’ont même accentué ensuite. Il est arrivé aussi qu’un nouveau gouvernement poursuive l’action de redressement.

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Paper provided by OECD Publishing in its series OECD Economics Department Working Papers with number 935.

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Date of creation: 16 Feb 2012
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Handle: RePEc:oec:ecoaaa:935-en
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