On the Predictability of Narrative Fiscal Adjustments
14 Pages Posted: 22 Jun 2015
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: Suggested Citation