The impact of fiscal consolidation on economic growth. An illustration for the Spanish economy based on a general equilibrium model

Pablo Hernández de Cos and Carlos Thomas

No 1205, Occasional Papers from Banco de España

Abstract: This study illustrates the effects of different fiscal consolidation measures on economic activity through simulations performed with a general equilibrium model calibrated to the Spanish economy. Overall, our results show that fiscal consolidation has short-run costs but sizable long-run benefits in terms of growth. Regarding the short-run costs, their magnitude depends crucially on the presence of confidence effects due to the consolidation process, which tend to reduce the value of fiscal multipliers

Keywords: Fiscal consolidation; general equilibrium; fiscal multipliers; confidence effects (search for similar items in EconPapers)
JEL-codes: C68 E62 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2012-05
New Economics Papers: this item is included in nep-cmp, nep-dge, nep-eec, nep-mac and nep-pbe
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:bde:opaper:1205

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