Modeling Optimal Fiscal Consolidation Paths in a Selection of European Countries

Daniel Kanda

No 2011/164, IMF Working Papers from International Monetary Fund

Abstract: For a number of countries - Italy, Netherlands, the United Kingdom, Germany, Ireland, and France - this paper develops an inter-temporal model that elicits the implied country-preferences over balancing the conflicting objectives of fiscal consolidation and reduction of economic slack. The model suggests that some front-loading of adjustment is desirable, although the extent would vary by country preferences. It also finds that proposed consolidations may prove to be stronger than acceptable, especially if somewhat larger than anticipated fiscal multipliers lead to a sizeable economic deceleration.

Keywords: WP; sustainability gap; Fiscal Sustainability; Italy; Netherlands; U.K.; Germany; Ireland; France; country preference; implied country-preference; associated output gaps; debt-GDP ratio rise; a number of country; country circumstances; Output gap; Fiscal stance; Fiscal multipliers; Fiscal consolidation; Global (search for similar items in EconPapers)
Pages: 23
Date: 2011-07-01
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Citations: View citations in EconPapers (16)

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