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Uncertain Fiscal Consolidations

Huixin Bi (), Eric Leeper () and Campbell Leith ()

No 2012-09, SIRE Discussion Papers from Scottish Institute for Research in Economics (SIRE)

Abstract: The paper explores the macroeconomic consequences of fiscal consolidations whose timing and composition are uncertain. Drawing on the evidence in Alesina and Ardagna (2010), we emphasize whether or not the fiscal consolidation is driven by tax rises or expenditure cuts. We find that the composition of the fiscal consolidation, its duration, the monetary policy stance, the level of government debt and expectations over the likelihood and composition of fiscal consolidations all matter in determining the extent to which a given consolidation is expansionary and/or successful in stabilizing government debt.

Keywords: government debt; budget reform; monetary-fiscal policy interactions (search for similar items in EconPapers)
Date: 2012
New Economics Papers: this item is included in nep-mac and nep-pbe
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Journal Article: Uncertain Fiscal Consolidations (2013) Downloads
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Working Paper: Uncertain Fiscal Consolidations (2012) Downloads
Working Paper: Uncertain Fiscal Consolidations (2012) Downloads
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