TY  - UNPD
A1  - Jordà, Òscar
A1  - Taylor, Alan M.
T1  - The time for austerity : estimating the average treatment effect of fiscal policy
T2  - SAFE working paper series ; No. 79
N2  - After the Global Financial Crisis a controversial rush to fiscal austerity followed in many countries. Yet research on the effects of austerity on macroeconomic aggregates was and still is unsettled, mired by the difficulty of identifying multipliers from observational data. This paper reconciles seemingly disparate estimates of multipliers within a unified and state-contingent framework. We achieve identification of causal effects with new propensity-score based methods for time series data. Using this novel approach, we show that austerity is always a drag on growth, and especially so in depressed economies: a one percent of GDP fiscal consolidation translates into 4 percent lower real GDP after five years when implemented in the slump rather than the boom. We illustrate our findings with a counterfactual evaluation of the impact of the U.K. government’s shift to austerity policies in 2010 on subsequent growth.
T3  - SAFE working paper - 79 
KW  - fiscal multipliers
KW  - booms
KW  - slumps
KW  - output fluctuations
KW  - allocation bias
KW  - matching
KW  - Rubin Causal Model
KW  - average treatment effect
KW  - propensity score
KW  - inverse probability weighting
KW  - regression adjustment
KW  - local projection
KW  - identification
Y1  - 2014
UR  - http://publikationen.ub.uni-frankfurt.de/frontdoor/index/index/docId/36138
UR  - https://nbn-resolving.org/urn:nbn:de:hebis:30:3-361387
UR  - http://safe-frankfurt.de/fileadmin/user_upload/editor_common/Research/Working_Paper/SAFE_WP_79.pdf
IS  - April 2014
PB  - SAFE
CY  - Frankfurt am Main
ER  -