Revenue- versus spending-based fiscal consolidation announcements: Multipliers and follow-up

Roel Beetsma, Oana Furtuna, Massimo Giuliodori and Haroon Mumtaz

Journal of International Economics, 2021, vol. 131, issue C

Abstract: Using a new narrative dataset on fiscal consolidation announcements for thirteen EU countries over the period 1978–2013, a panel VAR analysis shows that revenue-based announcements appear more credible, but affect economic activity more adversely than do spending-based announcements. Higher revenue multipliers and, to a lesser extent, larger actual follow-up following a revenue-based announcement help to explain the difference. The uniqueness of our dataset allows to control for anticipation effects of budgetary implementation and variables that respond quickly to news. The main findings are similar if we include in the specification open-economy variables.

Keywords: Fiscal consolidation announcements; Follow-up; Multipliers; Panel vector auto-regression; Narrative identification; Exports; Imports; Exchange rates (search for similar items in EconPapers)
JEL-codes: E21 E62 H5 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:inecon:v:131:y:2021:i:c:s0022199621000325

DOI: 10.1016/j.jinteco.2021.103455

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