Fiscal policy and fiscal fragility: Empirical evidence from the OECD

Makram El-Shagi and Gregor von Schweinitz

Journal of International Money and Finance, 2021, vol. 115, issue C

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: 2021
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Citations: View citations in EconPapers (2)

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Working Paper: Fiscal policy and fiscal fragility: Empirical evidence from the OECD (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:115:y:2021:i:c:s0261560620302485

DOI: 10.1016/j.jimonfin.2020.102292

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