Fiscal Policy and Fiscal Fragility: Evidence from the OECD

Makram El-Shagi and Gregor von Schweinitz

No 2019/5, CFDS Discussion Paper Series from Center for Financial Development and Stability at Henan University, Kaifeng, Henan, China

Abstract: In this paper, we use local projections to investigate the impact of consolidation shocks on GDP growh, conditional on the fragility of government finances. Based on the database of fiscal plans in OECD countries, we show that spending shocks are less detrimental than tax-based consolidation. In times of fiscal fragility, our results indicate strongly that governments should consolidate through surprise policy changes rather than announcements of consolidation at a later horizon.

Keywords: Fiscal multipliers; fiscal consolidation; local projections (search for similar items in EconPapers)
JEL-codes: E62 H63 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2019-06
New Economics Papers: this item is included in nep-eec, nep-mac and nep-pbe
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http://cfds.henuecon.education/images/dpaper/WP_5_2019_fiscal_policy_OECD.pdf First version, 2019 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:fds:dpaper:201905

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