Evidence on Fiscal Consolidations and the Evolution of Public Debt in Europe

Gianluca Cafiso and Roberto Cellini

No 4027, CESifo Working Paper Series from CESifo

Abstract: The objective of this paper is to gain insights into the relationship between deficit-reducing policies and the evolution of the debt/GDP ratio. We consider past events of fiscal consolidation in a selected group of EU countries, by using the new data set recently made available by Devries et al. (2011), and check what is the associated change of the debt/GDP ratio both from a short and medium-term perspective. Our results show that a favourable short-term response emerges in the majority of the countries considered, while the medium-term one is adverse for all. The analysis provides information to assess the convenience of deficit-reducing policies to contain or invert the evolution of the debt/GDP ratio.

Keywords: fiscal consolidation; debt; GDP ratio; European Union (search for similar items in EconPapers)
JEL-codes: E63 H63 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (5)

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