Fiscal policy and fiscal fragility: Empirical evidence from the OECD

Makram El-Shagi and Gregor von Schweinitz

No 13/2019, IWH Discussion Papers from Halle Institute for Economic Research (IWH)

Abstract: In this paper, we use local projections to investigate the impact of consolidation shocks on GDP growth, conditional on the fragility of government finances. Based on a 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)
Date: 2019
New Economics Papers: this item is included in nep-eec, nep-mac, nep-pbe and nep-pub
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https://www.econstor.eu/bitstream/10419/197961/1/1667222317.pdf (application/pdf)

Related works:
Journal Article: Fiscal policy and fiscal fragility: Empirical evidence from the OECD (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:iwhdps:132019

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