Pressure or prudence? Tales of market pressure and fiscal adjustment

Salvatore Dell' Erba, Todd Mattina and Agustin Roitman

Journal of International Money and Finance, 2015, vol. 51, issue C, 196-213

Abstract: We study whether multiyear fiscal adjustment plans in 17 OECD countries during 1980–2011 have been associated with market pressure. We find that only a fraction of the consolidations occurred under market pressure, suggesting that market pressure is important but not the main element associated with consolidation plans. Many adjustments under market pressure were also clustered around external shocks, and entailed larger median fiscal adjustments than other multiyear consolidations. In contrast, we find that virtually all multiyear consolidations aimed at reducing budget deficits occurred with initially weak macro-fiscal fundamentals.

Keywords: Market pressure; Fiscal adjustment; Fiscal consolidation; Macro-fiscal fundamentals; OECD; Advanced economies (search for similar items in EconPapers)
JEL-codes: E62 G12 H60 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (16)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:51:y:2015:i:c:p:196-213

DOI: 10.1016/j.jimonfin.2014.11.003

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