Are there change-points in the likelihood of a fiscal consolidation ending?

Luca Agnello (), Vitor Castro and Ricardo Sousa

No 18/2012, NIPE Working Papers from NIPE - Universidade do Minho

Abstract: Building on a narrative approach to identify episodes of fiscal consolidation, data for a group of 17 industrial countries over the period 1978-2009 and both continuous-time and discrete-time duration models, we find evidence suggesting that the likelihood of a fiscal consolidation ending increases over time, but only for programs that less than six years. Additionally, fiscal consolidations tend to last longer in non-European than in European countries. Our results emphasize that chronic fiscal imbalances might lead to a vicious austerity cycle, while discipline in the behaviour of fiscal authorities is a means of achieving credible and shorter adjustment measures.

Keywords: Fiscal Consolidation; Duration Analysis; Weibull Model; Duration Dependence; Change-Points. (search for similar items in EconPapers)
JEL-codes: C41 E62 (search for similar items in EconPapers)
Date: 2012
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Related works:
Working Paper: Are There Change-Points in the Likelihood of a Fiscal Consolidation Ending? (2013)
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