Long-term effects of fiscal stimulus and austerity in Europe

Sebastian Gechert, Gustav Horn and Christoph Paetz

No 2018.04, Working Papers from International Network for Economic Research - INFER

Abstract: We analyze whether there are negative (positive) long-term effects of austerity measures (stimulus measures) on potential output growth. Based on the approach of Blanchard and Leigh (2013) and Fatás and Summers (2016) and using a novel dataset of narratively identified fiscal policy shocks, we estimate the impact of these shocks on potential output. We robustly find a considerable underestimation of multiplier effects and their persistence for most European countries in the early years after the financial crisis and subsequent Euro Area crisis. We conclude that austerity was badly timed and thus not only deepened the crisis but may have caused evitable hysteresis effects.

Keywords: Fiscal Consolidation; Fiscal Multipliers; Forecast Errors; Hysteresis (search for similar items in EconPapers)
JEL-codes: E H (search for similar items in EconPapers)
Pages: 45 pages
Date: 2018
References: View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://infer-research.eu/wp-content/uploads/2020/ ... rdc5hn1538237801.pdf First version, 2018 (application/pdf)

Related works:
Journal Article: Long‐term Effects of Fiscal Stimulus and Austerity in Europe (2019)
Working Paper: Long-term effects of fiscal stimulus and austerity in Europe (2017)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:inf:wpaper:2018.04

Access Statistics for this paper

More papers in Working Papers from International Network for Economic Research - INFER Contact information at EDIRC.
Bibliographic data for series maintained by Pedro Cerqueira ( this e-mail address is bad, please contact ).