Paradox of Austerity: Multi-Country Evidence

Surajit Das and Israa A. El Husseiny

Emerging Markets Finance and Trade, 2019, vol. 55, issue 8, 1681-1693

Abstract: This article seeks to explore whether a reduction in the government expenditure would necessarily reduce the fiscal deficit to GDP ratio or not. It has been theoretically argued that this would really depend upon the values of the government expenditure elasticity and that of the revenue buoyancy of the economies, which are, in turn, dependent upon various institutional and historical factors of the respective economies. Based on available empirical evidence from 175 countries for 15 years (from 2000 to 2014), the authors argue that a cut in the government expenditure might paradoxically lead to a higher fiscal deficit to GDP ratio for about half of the countries around the globe. This study tries to argue that an improvement in the value of fiscal multiplier and that in the tax buoyancy can be the policy alternatives to various painful austerity measures.

Date: 2019
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://hdl.handle.net/10.1080/1540496X.2018.1530652 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:mes:emfitr:v:55:y:2019:i:8:p:1681-1693

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/MREE20

DOI: 10.1080/1540496X.2018.1530652

Access Statistics for this article

More articles in Emerging Markets Finance and Trade from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().