The Permanent Effects of Fiscal Consolidations
By Antonio Fatás, Lawrence H. Summers. 2017
319 citations recorded by the source corpus.
The global financial crisis has permanently lowered the path of GDP in all advanced economies. At the same time, and in response to rising government debt levels, many of these countries have been engaging in fiscal consolidations that have had a negative impact on growth rates. We empirically explore the connections between these two facts by extending to longer horizons the methodology of Blanchard and Leigh (2013) regarding fiscal policy multipliers. Our results provide support for the presence of strong hysteresis effects of fiscal policy. The large size of the effects points in the direction of self-defeating fiscal consolidations as suggested by DeLong and Summers (2012). Attempts to reduce debt via fiscal consolidations have very likely resulted in a higher debt to GDP ratio through their long-term negative impact on output.
Subfields: Economics and Econometrics
View Paper: https://www.semanticscholar.org/paper/a9afa806ced53a8f613daa965cfcd8640696cc42
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Citations in the corpus
- The European Trust Crisis and the Rise of Populism (2017, background): “26 The Kleibergen-Paap Wald F-test of the first stage is 28, 21, 15 and 17. The critical values of the Stock and Yogo (2002) weak instrument tabulations are 16.”
- The Long-Run Effects of Monetary Policy (2020, methodology): “Quarterly data series are taken from Fernald (2014). See text.”