Trust in government and fiscal adjustments : [Version 4 June 2013]

  • The paper looks at the determinants of fiscal adjustments as reflected in the primary surplus of countries. Our conjecture is that governments will usually find it more attractive to pursue fiscal adjustments in a situation of relatively high growth, but based on a simple stylized model of government behavior the expectation is that mainly high trust governments will be in a position to defer consolidation to years with higher growth. Overall, our analysis of a panel of European countries provides support for this expectation. The difference in fiscal policies depending on government trust levels may help explaining why better governed countries have been found to have less severe business cycles. It suggests that trust and credibility play an important role not only in monetary policy, but also in fiscal policy.

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Metadaten
Author:Dirk BursianGND, Alfons J. WeichenriederORCiDGND, Jochen Zimmer
URN:urn:nbn:de:hebis:30:3-305750
URL:http://ssrn.com/abstract=2280367
DOI:https://doi.org/10.2139/ssrn.2280367
Parent Title (German):SAFE working paper series ; No. 22
Series (Serial Number):SAFE working paper (22)
Publisher:SAFE
Place of publication:Frankfurt am Main
Document Type:Working Paper
Language:English
Year of Completion:2013
Year of first Publication:2013
Publishing Institution:Universit├Ątsbibliothek Johann Christian Senckenberg
Release Date:2013/06/27
Tag:EU; debt sustainability; euro area; fiscal reaction function; trust
Issue:Version 4 June 2013
Page Number:25
HeBIS-PPN:348845715
Institutes:Wirtschaftswissenschaften / Wirtschaftswissenschaften
Wissenschaftliche Zentren und koordinierte Programme / House of Finance (HoF)
Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS)
Sammlungen:Universit├Ątspublikationen
Licence (German):License LogoDeutsches Urheberrecht