The output effect of fiscal consolidation plans

We show that the correct experiment to evaluate the effects of a fiscal adjustment is the simulation of a multi year fiscal plan rather than of individual fiscal shocks. Simulation of fiscal plans adopted by 16 OECD coun
We show that the correct experiment to evaluate the effects of a fiscal adjustment is the simulation of a multi year fiscal plan rather than of individual fiscal shocks. Simulation of fiscal plans adopted by 16 OECD countries over a 30-year period supports the hypothesis that the effects of consolidations depend on their design. Fiscal adjustments based upon spending cuts are much less costly, in terms of output losses, than tax-based ones and have especially low output costs when they consist of permanent rather than stop and go changes in taxes and spending. The difference between tax-based and spending-based adjustments appears not to be explained by accompanying policies, including monetary policy. It is mainly due to the different response of business confidence and private investment.
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Metadaten
Author:Alberto Alesina, Carlo Favero, Francesco Giavazzi
URN:urn:nbn:de:hebis:30:3-361347
URL:http://safe-frankfurt.de/fileadmin/user_upload/editor_common/Research/Working_Paper/SAFE_WP_76.pdf
Parent Title (English):SAFE working paper series ; No. 76
Series (Serial Number):SAFE working paper series (76)
Publisher:SAFE
Place of publication:Frankfurt am Main
Document Type:Working Paper
Language:English
Year of Completion:2014
Year of first Publication:2014
Publishing Institution:Universitätsbibliothek Johann Christian Senckenberg
Release Date:2014/12/17
Tag:confidence; fiscal adjustment; investment
Issue:This version: October 2014
Pagenumber:68
HeBIS PPN:35298998X
Institutes:Wirtschaftswissenschaften
House of Finance (HoF)
Center for Financial Studies (CFS)
Sustainable Architecture for Finance in Europe (SAFE)
Dewey Decimal Classification:330 Wirtschaft
JEL-Classification:E62 Fiscal Policy
H60 General
Sammlungen:Universitätspublikationen
Licence (German):License Logo Veröffentlichungsvertrag für Publikationen

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