Prudence or Profligacy: Deficits, Debt, and Fiscal Consolidation

Posted: 29 Feb 2008

See all articles by Andrea Boltho

Andrea Boltho

University of Oxford - Magdalen College

Andrew Glyn

University of Oxford - Department of Economics

Date Written: 2006

Abstract

Over the last quarter century, public finances have been under pressure in most OECD countries as deficits and debts rose under the pressure of relatively slow growth and high interest rates. This, in turn, has affected the welfare state, since efforts at containing deficits have often been concentrated on public expenditure. Much of the literature argues that this is desirable, since curbing deficits via tax increases seldom succeeds. A medium-term survey of OECD country experience suggests a less clear-cut conclusion. In a number of countries which were able to curb debt/GDP ratios, the bulk of the adjustment did, indeed, come from spending cuts (but was, also, in some cases helped by rapid growth and/or currency depreciation). In several, however, tax increases also appear to have succeeded in reducing deficits and debt.

Suggested Citation

Boltho, Andrea and Glyn, Andrew, Prudence or Profligacy: Deficits, Debt, and Fiscal Consolidation ( 2006). Oxford Review of Economic Policy, Vol. 22, Issue 3, pp. 411-425, 2006, Available at SSRN: https://ssrn.com/abstract=1096840 or http://dx.doi.org/10.1093/oxrep/grj024

Andrea Boltho (Contact Author)

University of Oxford - Magdalen College ( email )

Magdalen College
Oxford, OX1 4AU
United Kingdom

Andrew Glyn

University of Oxford - Department of Economics ( email )

Manor Road Building
Manor Road
Oxford, OX1 3BJ
United Kingdom
+44 1865 276700 (Phone)
+44 1865 793121 (Fax)

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