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Fiscal Contractions in Eurozone in the Years 1995-2013. Can Non-Keynesian Effects Be Helpful in Future Deleverage Process?

Author

Listed:
  • Adam P. Balcerzak

    () (Nicolaus Copernicus University, Poland)

  • Michal Bernard Pietrzak

    () (Nicolaus Copernicus University, Poland)

  • Elzbieta Rogalska

    () (University of Warmia and Mazury, Poland)

Abstract

Last global financial crisis has led to massive fiscal stimulation actions in most of developed countries which resulted in significant increase of their public debt. For many economists current level of debt in case of many highly developed countries is coming up to unsustainable level or at least level that has negative consequences on the long term growth. This can be also said about Eurozone or wider EU economies. This factors in near future will force many EU countries to adopt much stricter middle and long term fiscal policy that will be necessary for deleveraging process. In this context the aim of the research is to check whether can one find non-Keynesian effects of fiscal consolidations in Eurozone countries in last decade. If the answer is positive, then could these non-Keynesian effects be significant developing factor in case of Eurozone countries. The third scientific question concentrates on the ways the fiscal consolidations were implemented and the potential influence of consolidations strategies on short term growth. The research is based on European Commission and Eurostat fiscal and macroeconomic data for Eurozone countries for the years 1995-2013. In the research the econometric dynamic panel model based on the concept of conditional convergence was applied. As a complementary method qualitative analysis of cases of significant contractions was made with the concentration on the differences between expansionary thus non-Keynesian cases and conventional Keynesian cases of fiscal contractions. The research results give some arguments for existence of fiscal transitions channels leading to non-Keynesian effects of fiscal policy, which in the same time can be a factor of conditional convergence. Thus in case of proper construction of fiscal consolidations polices these factors can be helpful in future deleverage process.

Suggested Citation

  • Adam P. Balcerzak & Michal Bernard Pietrzak & Elzbieta Rogalska, 2014. "Fiscal Contractions in Eurozone in the Years 1995-2013. Can Non-Keynesian Effects Be Helpful in Future Deleverage Process?," Working Papers 13/2014, Institute of Economic Research, revised Sep 2014.
  • Handle: RePEc:pes:wpaper:2014:no13
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    Cited by:

    1. Adam P. Balcerzak & Elzbieta Rogalska, 2016. "Non-Keynesian Effects of Fiscal Consolidations in Central Europe in the Years 2000-2013," Chapters,in: Mehmet Huseyin Bilgin & Hakan Danis (ed.), Entrepreneurship, Business and Economics - Vol. 2. Proceedings of the 15th Eurasia Business and Economics Society, edition 1, volume 2, chapter 18, pages 271-282 Institute of Economic Research.

    More about this item

    Keywords

    fiscal policy; fiscal consolidations; non-Keynesian effects; conditional convergence;

    JEL classification:

    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents

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