Fiscal Adjustments: Determinants and Macroeconomic Consequences

36 Pages Posted: 14 Feb 2012

See all articles by Manmohan Kumar

Manmohan Kumar

International Monetary Fund (IMF) - Research Department

Daniel Leigh

International Monetary Fund (IMF)

Alexander Plekhanov

International Monetary Fund (IMF)

Multiple version iconThere are 2 versions of this paper

Date Written: Marech 29, 2007

Abstract

Manmohan S. Kumar, Daniel Leigh and Alexander Plekhanov analyze the determinants of fiscal consolidation success in OECD economies as well as the short-run and long-run effects of fiscal adjustments on economic activity. They examine fourteen case studies, panel data for OECD economies, and the results of simulations using a non-Ricardian multi-country dynamic general equilibrium model. They find that while fiscal consolidations tend to have short-run contractionary effects, they can be expansionary in the long run, provided that they do not rely excessively on cuts in productive government expenditure. They can also create positive spillover effects for the rest of the world.

Suggested Citation

Kumar, Manmohan and Leigh, Daniel and Plekhanov, Alexander, Fiscal Adjustments: Determinants and Macroeconomic Consequences (Marech 29, 2007). Available at SSRN: https://ssrn.com/abstract=2004331 or http://dx.doi.org/10.2139/ssrn.2004331

Manmohan Kumar (Contact Author)

International Monetary Fund (IMF) - Research Department ( email )

700 19th Street NW
Washington, DC 20431
United States
202-623-7771 (Phone)
202-589-7771 (Fax)

Daniel Leigh

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Alexander Plekhanov

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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