Abstract

http://ssrn.com/abstract=1886910
 
 

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Expansionary Austerity New International Evidence


Andrea Pescatori


Federal Reserve Bank of Cleveland

Daniel Leigh


International Monetary Fund (IMF)

Jaime Guajardo


International Monetary Fund (IMF)

July 2011

IMF Working Paper No. 11/158

Abstract:     
This paper investigates the short-term effects of fiscal consolidation on economic activity in OECD economies. We examine the historical record, including Budget Speeches and IMFdocuments, to identify changes in fiscal policy motivated by a desire to reduce the budget deficit and not by responding to prospective economic conditions. Using this new dataset, our estimates suggest fiscal consolidation has contractionary effects on private domestic demand and GDP. By contrast, estimates based on conventional measures of the fiscal policy stance used in the literature support the expansionary fiscal contractions hypothesis but appear to be biased toward overstating expansionary effects.

Number of Pages in PDF File: 41

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Date posted: July 16, 2011  

Suggested Citation

Pescatori, Andrea and Leigh, Daniel and Guajardo, Jaime, Expansionary Austerity New International Evidence (July 2011). IMF Working Papers, Vol. , pp. 1-40, 2011. Available at SSRN: http://ssrn.com/abstract=1886910

Contact Information

Andrea Pescatori
Federal Reserve Bank of Cleveland ( email )
1455 E 6th ST
Cleveland, OH 44114
United States
HOME PAGE: http://clevelandfed.org/Research/Economists/index.cfm?action=ShowAuthorPubs&author=676&pagetype=6
Daniel Leigh
International Monetary Fund (IMF) ( email )
700 19th Street, N.W.
Washington, DC 20431
United States
Jaime Guajardo
International Monetary Fund (IMF) ( email )
700 19th Street, N.W.
Washington, DC 20431
United States
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