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Expansionary fiscal contractions?

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  • Vincent (Vincent Peter) Hogan

Abstract

We examine the usefulness of the Expansionary Fiscal Contraction hypothesis in explaining the performance of the Irish and Danish economies. We find some evidence in favour of a weak version of the EFC hypotheisis: If the budget deficit is reduced in response to a fiscal crisis, consumption does seem to increase. However this increase is not enough to offset the direct effect of a reduction in the deficit on output- fiscal contractions are not literally expansionary.

Suggested Citation

  • Vincent (Vincent Peter) Hogan, 2001. "Expansionary fiscal contractions?," Working Papers 200103, School of Economics, University College Dublin.
    • Handle: RePEc:ucn:wpaper:200103
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    File URL: http://hdl.handle.net/10197/925
    File Function: First version, 2001
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    References listed on IDEAS

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    4. Francesco Giavazzi & Tullio Jappelli & Marco Pagano, "undated". "Searching for Non-Keynesian Effects of Fiscal Policy," Working Papers 136, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
    5. Perotti, Roberto, 1996. "Fiscal Consolidation in Europe: Composition Matters," American Economic Review, American Economic Association, vol. 86(2), pages 105-110, May.
    6. Alberto Alesina & Roberto Perotti, 1995. "Fiscal Expansions and Fiscal Adjustments in OECD Countries," NBER Working Papers 5214, National Bureau of Economic Research, Inc.
    7. Olivier Jean Blanchard & Stanley Fischer (ed.), 1990. "NBER Macroeconomics Annual 1990," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262521555, December.
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