Is government spending the key to successful consolidation?

M. Nautet, Ruben Schoonackers, P. Stinglhamber and L. Van Meensel
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M. Nautet: National Bank of Belgium
P. Stinglhamber: National Bank of Belgium
L. Van Meensel: National Bank of Belgium

Economic Review, 2014, issue i, 29-44

Abstract: The financial crisis that erupted during 2007 and intensified in 2008 and the ensuing economic recession led to a serious deterioration in the public finances of most advanced economies. That resulted in a sharp increase in the fiscal deficit and public debt in those countries, including Belgium. Since then, almost all countries have made considerable efforts to achieve fiscal consolidation in order to end the unsustainable developments. However, restoring sustainable public finances will entail additional efforts in most countries in the years ahead. This article examines the budgetary instruments that can be used to continue consolidating public finances. In the process, it examines in depth the role of public spending. It describes the impact of the various budgetary instruments on economic activity in both the short and long term. Special attention is given to the fiscal position and potential consolidation instruments in Belgium.

Keywords: Fiscal consolidation; government expenditure; fiscal multipliers; fiscal policy (search for similar items in EconPapers)
JEL-codes: H3 H5 H6 (search for similar items in EconPapers)
Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:nbb:ecrart:y:2014:m:june:i:i:p:29-44

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