Assessing Fiscal Episodes
ISEG Working Paper No. 15/2011/DE/UECE
41 Pages Posted: 17 Sep 2011
Date Written: September 16, 2011
In an OCDE panel, for the period 1970-2010, we assess the effects of fiscal consolidation episodes, with four different definitions. Our results reveal that lower final government consumption would increase private consumption in three out of the four approaches, when there is a fiscal consolidation, and the debt ratio is above the cross-country average. The change in the cyclically adjusted primary balance and the duration of the consolidation episode contribute for the success of the consolidation, and the opposite applies if the latter is more based on the revenue side. Finally, the effects of social transfers on private investment tend to be negative.
Keywords: fiscal consolidation, non-Keynesian effects, panel data, logit
JEL Classification: C23, E21, E62, H5, H62
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