Fiscal Multipliers and the Effects of Consolidation Measures in Finland: Literature Review

Juha Tervala and Päivi Puonti

No 171, ETLA Reports from The Research Institute of the Finnish Economy

Abstract: Abstract The chronic fiscal deficits of Finland and the continuous increase of the public debt-to-GDP ratio are likely to require further fiscal consolidation through cuts of public expenditure and increases of taxation. Although contractionary fiscal consolidation measures reduce the level of GDP in the short term, their effects may vary across categories of expenditure and taxation. The prolonged weakness of economic growth has further undermined the sustainability of the public finances of Finland, which in turn highlights the need for consolidation measures that minimise the losses of output. This literature review examines fiscal multipliers as support for the design of growth-friendly consolidation strategies. This analysis pays special attention to the impact of Finland’s economic structure on the size of fiscal multipliers, with the objective of producing policy-relevant evidence.

Keywords: Fiscal consolidation; Fiscal policy; Fiscal multiplier; Fiscal sustainability; Macroeconomic policy (search for similar items in EconPapers)
JEL-codes: E62 E63 H30 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2025-12-16
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