On the Predictability of Narrative Fiscal Adjustments

14 Pages Posted: 22 Jun 2015

See all articles by Pablo Hernández de Cos

Pablo Hernández de Cos

Banco de España

Enrique Moral-Benito

Banco de España; Universidad Carlos III de Madrid

Date Written: June 22, 2015


In an influential paper, Devries et al. (2011) construct narrative series of tax- and spending-based fiscal adjustments for a panel of OECD countries. In this paper, we find that the adjustments based on spending cuts can be predicted on the basis of past output growth and other macroeconomic variables. Moreover, we illustrate that this source of endogeneity may generate significant differences in the estimated multipliers.

Keywords: fiscal adjustment, fiscal multiplier

JEL Classification: H60, E62

Suggested Citation

Hernández de Cos, Pablo and Moral-Benito, Enrique, On the Predictability of Narrative Fiscal Adjustments (June 22, 2015). Banco de Espana Working Paper No. 1516. Available at SSRN: https://ssrn.com/abstract=2621443 or http://dx.doi.org/10.2139/ssrn.2621443

Pablo Hernández de Cos (Contact Author)

Banco de España ( email )

Madrid, 28014

Enrique Moral-Benito

Banco de España ( email )

Alcala 50
Madrid 28014

Universidad Carlos III de Madrid ( email )

CL. de Madrid 126
Madrid, Madrid 28903

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