Fiscal Stabilizations: When Do They Work and Why
By Silvia Ardagna. 2004
250 citations recorded by the source corpus.
This paper studies the determinants and channels through which fiscal contractions influence the dynamics of the debt-to-GDP ratio and GDP growth. Using data from a panel of OECD countries, the paper shows that the success of fiscal adjustments in decreasing the debt-to-GDP ratio depends on the size of the fiscal contraction and less on its composition. The rate of growth of output matters too, but higher GDP growth does not drive the success of a fiscal stabilization. In contrast, whether a fiscal adjustment is expansionary depends largely on the composition of the fiscal maneuvre. In particular, stabilizations implemented by cutting public spending lead to higher GDP growth rates. The effects of the composition on growth work mostly through the labor market rather than through agents’ expectations of future fiscal policy. Finally, the evidence suggests that successful and expansionary fiscal contractions are not the result of accompanying expansionary monetary policy or exchange rate devaluations.
Subfields: Economics and Econometrics
View Paper: https://www.semanticscholar.org/paper/2a2520093ea74d45c8a3d76170b5a1a58ec520ba
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In Economics and Econometrics
- António Afonso
- Ricardo M. Sousa
- Candida Ferreira
- Pedro Gomes
- Gerry McNamara
- Paul M. Vaaler
- Éric Paget-Blanc
- Constantin Mellios
Citations in the corpus
- Are Fiscal Adjustments Less Successful in Decentralized Governments? (2009, unknown): “We follow Ardagna (2004) including all observations in which there is a “need” for fiscal stabilization instead of only considering those years in which we observe a large fiscal contraction.6 Since there is no common definition when there is a “need” of fiscal austerity, we cannot distinguish…”
- The Design of Fiscal Adjustments (2013, unknown): “that the results based on episodes identified via the “narrative” method were substantially different from those of the preexisting literature (and inparticularofAlesina andPerotti [1995] andAlesina andArdagna [2010]) is largely unsubstantiated. In particular,we showbelow that the claim that the com”
- Expansionary fiscal consolidations in Europe: new evidence (2010, background): “For instance, Ardagna (2004) mention in this context that the composition of fiscal policy may have economic effects via the labour market as a result of reducing public spending, notably salaries, instead of rising taxes.”
- Fiscal policy in unionized labor markets (2007, unknown): “InstRepos:dash.current.terms-ofuse#LAA Fiscal Policy in Unionized Labor Markets Silvia Ardagna1 Harvard University This version: May 2006 JEL: E62, E20, H61, J51.”