scholarly journals Fiscal Consolidation As a Self-Fulfilling Prophecy on Fiscal Multipliers

2015 ◽  
Author(s):  
Hubert Bukowski
Keyword(s):  
Fiscal Consolidation ◽  
Fiscal Multipliers

The IMF, the UK Policy Debate, and Debt and Deficit Discourse

2018 ◽  
Author(s):  
Ben Clift
Keyword(s):  
Adverse Effects ◽  
Coalition Government ◽  
Policy Debate ◽  
Fiscal Consolidation ◽  
Policy Space ◽  
Fiscal Multipliers ◽  
Scientific Image ◽  
The Uk ◽  
Deep Recession ◽  
The Imf

This chapter charts changing character of the economic ideas informing fiscal policymaking in Britain, and Fund responses to them. Drawing on interviews with the Fund’s UK Missions and UK authorities, it shows how, despite the IMF’s prizing of its non-political, scientific image, its differing views of UK policy space and prioritization became the stuff of a contested politics. The central assumption of the coalition government’s construction of fiscal rectitude was that Britain faced a ‘crisis of debt’, yet the IMF did not share this view. Fund work on fiscal multipliers being higher during recessions, and the adverse effects of fiscal consolidation on growth, all had pointed relevance for UK policy. The coalition government saw little potential for activist fiscal policy in support of growth. In 2013 Blanchard accused the UK authorities of ‘playing with fire’ by pursuing excessively harsh austerity which threatened a prolonged and deep recession.

Reducing Debt Short of Default

2019 ◽  
pp. 225-274
Author(s):  
Tom Best ◽  
Oliver Bush ◽  
Luc Eyraud ◽  
M. Belen Sbrancia
Keyword(s):  
Interest Rate ◽  
Fiscal Consolidation ◽  
Financial Repression ◽  
Fiscal Multipliers ◽  
Debt Accumulation ◽  
Key Terms ◽  
The Impact

If debt is too high, what policies are available to governments to reduce these debt obligations? This chapter goes through all options, short of default. It begins by introducing the standard debt accumulation equation, noting the key terms, such as the growth–interest rate differential; and their relation to policies. Once this is established, the more conventional strategies for reducing debt—promoting growth and fiscal consolidation—are explored. Particular emphasis is given to the impact of fiscal multipliers, and the factors that influence their magnitude. The chapter then moves on to more unconventional policies, such as inflation, seigniorage and financial repression.

Fiscal Multipliers and the Risk of Self-defeating Fiscal Consolidation: Evidence for the Italian Economy

2017 ◽  
pp. 193-204
Author(s):  
Francesco Felici ◽  
Francesco Nucci ◽  
Ottavio Ricchi ◽  
Cristian Tegami
Keyword(s):  
Fiscal Consolidation ◽  
Italian Economy ◽  
Fiscal Multipliers

scholarly journals FISCAL POLICIES IN PANDEMIC TIMES: EUROPEAN EXPERIENCES

2021 ◽  
Author(s):  
Gligor Bishev ◽  
◽  
Aleksandar Stojkov ◽  
Fatmir Besimi ◽  
◽  
...  
Keyword(s):  
Economic Growth ◽  
Public Debt ◽  
Empirical Literature ◽  
Policy Response ◽  
Fiscal Policies ◽  
Fiscal Consolidation ◽  
Fiscal Stimulus ◽  
Debt Sustainability ◽  
Fiscal Multipliers ◽  
The Impact

The pandemic recession was fundamentally different from ordinary recessions, and thus required a different policy response. We review the empirical literature on fiscal consolidation and fiscal multipliers. Then, we assess the impact of fiscal policies on the pace of recovery and public debt sustainability. A premature or a strong fiscal consolidation might result in lower rates of economic growth and elevated public debt as a share of GDP. We critically analyze different adjustment paths across Europe and offer policy-relevant recommendations. The issue is particularly relevant for countries with a strong fiscal stimulus and moderate to high levels of public debt.

scholarly journals Fiscal Consolidation, Public Debt and Output Dynamics in the Euro Area: lessons from a simple model with time-varying fiscal multipliers

2014 ◽  
Vol 124 (6) ◽  
pp. 953 ◽  
Author(s):  
Christophe Blot ◽  
Marion Cochard ◽  
Jérôme Creel ◽  
Bruno Ducoudré ◽  
Danielle Schweisguth ◽  
...  
Keyword(s):  
Simple Model ◽  
Euro Area ◽  
Public Debt ◽  
Time Varying ◽  
Fiscal Consolidation ◽  
Fiscal Multipliers

scholarly journals The Impact of Labor Income Tax Progressivity on the Fiscal Multipliers in the Context of the Fiscal Consolidation

2020 ◽  
pp. 21-38
Author(s):  
Mariana Santos
Keyword(s):  
Incomplete Markets ◽  
Income Tax ◽  
Structural Characteristics ◽  
The United States ◽  
Labor Income ◽  
Fiscal Consolidation ◽  
Overlapping Generations Model ◽  
Fiscal Multipliers ◽  
Tax Progressivity ◽  
The Impact

Fiscal multipliers depend on several structural characteristics of each economy. In this study it is argued that labor income tax progressivity lowers the fiscal multipliers of fiscal consolidation programs. By calibrating an incomplete‑ markets, overlapping generations model for the United States for different values of the labor income tax progressivity, it is shown that as progressivity increases the recessionary impacts of fiscal consolidation are lower in the case of consolidation through decrease of government spending and are more recessionary in the case of consolidation financed with tax hikes.

scholarly journals Asset Liquidity and Fiscal Consolidation Programs

2020 ◽  
pp. 69-89
Author(s):  
Tiago Bernardino
Keyword(s):  
Wealth Distribution ◽  
Balance Sheet ◽  
Negative Relationship ◽  
Wealth Inequality ◽  
Underlying Mechanism ◽  
Fiscal Consolidation ◽  
Fiscal Multipliers ◽  
Distribution Of Wealth ◽  
Asset Liquidity ◽  
The Relationship

We argue that the relationship between wealth inequality and fiscal multipliers depends crucially on the type of fiscal experiment used, and on the measure of wealth distribution. We calibrate an overlapping generations model with incomplete markets for different European economies and use Household Finance and Consumption Survey (HFCS) data to compare fiscal multipliers when models are calibrated to match the distribution of gross vs. net wealth. We find a negative relationship between fiscal multipliers and wealth inequality when considering fiscal consolidation programs, in contrast to fiscal expansion experiments which are standard in the literature. The underlying mechanism relies on the relationship between the distribution of wealth and the share of credit‑ constrained agents. We examine the role of household balance sheet compositions regarding asset liquidity and find that when calibrating the model to match liquid wealth, the relationship between wealth inequality and fiscal multipliers is much stronger.

scholarly journals Is there an alternative strategy for reducing public debt by 2032?

2014 ◽  
Vol 61 (1) ◽  
pp. 39-57 ◽  
Author(s):  
Christophe Blot ◽  
Marion Cochard ◽  
Jérôme Creel ◽  
Bruno Ducoudré ◽  
Danielle Schweisguth ◽  
...  
Keyword(s):  
Simple Model ◽  
Euro Area ◽  
Public Debt ◽  
Alternative Strategy ◽  
Debt Ratio ◽  
Fiscal Consolidation ◽  
Fiscal Multipliers ◽  
Alternative Path ◽  
Fiscal Compact ◽  
Output Losses

EMU countries have engaged in fiscal consolidation since 2011. This strategy has proven to be costly in terms of GDP. This cost has been amplified by the fact that fiscal multipliers are high in time of crisis, as recently stressed by the literature. Within this context, we wonder whether there is an alternative strategy aiming at bringing back the debt ratio to 60% of GDP in 2032, meanwhile lowering output losses. To this end, we report simulations realized from a simple model describing the Eurozone and the timing for consolidation. Based on a pragmatic view of the fiscal compact, we find an alternative path for consolidation which achieves a 60% threshold for public debt over the next 20 years in most euro area countries.

scholarly journals Growth Forecast Errors and Fiscal Multipliers

2013 ◽  
Vol 103 (3) ◽  
pp. 117-120 ◽  
Author(s):  
Olivier J Blanchard ◽  
Daniel Leigh
Keyword(s):  
Early Years ◽  
Forecast Errors ◽  
Fiscal Consolidation ◽  
Lower Growth ◽  
Fiscal Multipliers ◽  
Advanced Economies

This paper investigates the relation between growth forecast errors and planned fiscal consolidation during the crisis. We find that, in advanced economies, stronger planned fiscal consolidation has been associated with lower growth than expected. The relation is particularly strong, both statistically and economically, early in the crisis. A natural interpretation is that fiscal multipliers were substantially higher than implicitly assumed by forecasters. The weaker relation in more recent years may in part reflect learning by forecasters and in part smaller multipliers than in the early years of the crisis.

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