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Fiscal consolidation and the sustainability of public debt in the GIPSI countries

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  • Manel Antelo

    (University of Santiago de Compostela, Department of Foundations of Economic Analysis, 15782 Santiago de Compostela, Spain)

  • David Peón

    (BBVA Group and University of A Coruña, Department of Finance and Accounting, 15701 A Coruña, Spain)

Abstract

Correcting fiscal imbalances and reducing public debt is a priority among the peripheral countries of the Eurozone (the so-called GIPSI countries). However, there is no consensus about which is the most appropriate policy mix to achieve it: the debate on fiscal austerity vs. growth is bitter now among researchers and international policymakers. In this paper we review the effects of different fiscal consolidation policies on macroeconomic performance. We also provide an empirical analysis that complements the recent study performed by the IMF regarding the sustainability of public debt for GIPSI countries in different scenarios of growth, inflation, and fiscal and monetary policies. Finally, a policy mix is offered that would be suitable for these five countries to achieve both fiscal consolidation and economic growth.

Suggested Citation

  • Manel Antelo & David Peón, 2014. "Fiscal consolidation and the sustainability of public debt in the GIPSI countries," Cuadernos de Economía - Spanish Journal of Economics and Finance, Asociación Cuadernos de Economía, vol. 37(103), pages 52-71, Abril.
    • Handle: RePEc:cud:journl:v:37:y:2014:i:103:p:52-71
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    More about this item

    Keywords

    Fiscal consolidation. Austerity. Growth. Public debt. Government spending multiplier. GIPSI countries.;

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy

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