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What do we know about the effects of austerity?

Carlo Favero (), Francesco Giavazzi and Alberto Alesina

No 12655, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This paper summarizes the results of a large recent literature on multi year fiscal plans for deficit reduction (austerity). The key results are that deficit reduction policies based upon spending cuts are much less costly in terms of short run output losses than tax based adjustments. On average fiscal adjustment based upon spending cuts have very samll otput costs and in come cases they are expansionary. We then discuss which possible models can explain these findings and discuss how the evidence can disentangle them.

Keywords: Austerity (search for similar items in EconPapers)
JEL-codes: E62 H60 (search for similar items in EconPapers)
Date: 2018-01
New Economics Papers: this item is included in nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (49)

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