Fiscal consolidations

Markus Brueckner
Authors registered in the RePEc Author Service: Markus Brueckner

CAMA Working Papers from Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University

Abstract: I examine whether action-based fiscal consolidations are exogenous to contemporaneous GDP growth. Based on the narrative record, these fiscal consolidations had the primary objective to reduce a budget deficit. I find that temperature changes, the GDP growth rate of trading partners, and an international commodity price index have significant: (i) negative contemporaneous effects on action-based fiscal consolidations; (ii) positive contemporaneous effects on GDP growth. These results imply that it is highly unlikely that action-based fiscal consolidations are exogenous to contemporaneous GDP growth. Using an instrumental variables approach, I find that action-based fiscal consolidations have significant positive effects on GDP growth.

Keywords: Fiscal Consolidations; GDP Growth; Identification; Narrative Approach; Simultaneous Systems of Equations (search for similar items in EconPapers)
JEL-codes: E0 O4 (search for similar items in EconPapers)
Pages: 72 pages
Date: 2021-07
New Economics Papers: this item is included in nep-mac and nep-ure
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Persistent link: https://EconPapers.repec.org/RePEc:een:camaaa:2021-57

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