The Design of Fiscal Adjustments
Alberto F. Alesina
Harvard University - Department of Economics; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)
National Bureau of Economic Research (NBER); Goldman Sachs - London
September 24, 2012
This paper offers three results. First, in line with the previous literature we confirm that fiscal adjustments based mostly on the spending side are less likely to be reversed. Second, spending based fiscal adjustments have caused smaller recessions than tax-based fiscal adjustments. Finally, certain combinations of policies have made it possible for spending based fiscal adjustments to be associated with growth in the economy even on impact rather than with a recession. Thus, expansionary fiscal adjustments are possible.
Number of Pages in PDF File: 52
Keywords: deficit reduction, policy reforms, taxes versus spending
JEL Classification: E62, H62
Date posted: September 24, 2012
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