Reconsidering Non-Keynesian Effects of Fiscal Consolidations over the Business Cycle

Alessandro Casini

Rivista di Politica Economica, 2013, issue 4, 11-45

Abstract: This paper uses fiscal consolidation experiences of a sample of OECD economies over the period 1970 to 2008 to examine the interplay between fiscal adjustments and economic performance.The main purpose of this paper is to study whetherthe impact of fiscal consolidation on the real economy is notsymmetric with respect to economic conditions. It followsAlesina and Ardagna (2010) and introduces a new approachbased on business cycle. The results suggest time variation inthe coefficients that describe the response of output to fiscalshocks. We find that fiscal austerity can be expansionarywhen it occurs in good times.

Keywords: non-Keynesian effects; fiscal consolidations; business cycle; cyclical phases; asymmetric output responses; output-gap (search for similar items in EconPapers)
JEL-codes: E60 H50 H60 H62 (search for similar items in EconPapers)
Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:rpo:ripoec:y:2013:i:4:p:11-45

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