Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/152953
Authors: 
Rzonca, Andrzej
Cizkowicz, Piotr
Year of Publication: 
2005
Series/Report no.: 
ECB Working Paper 519
Abstract: 
Many economists are convinced that longer-term benefits from fiscal consolidation are in a trade-off with short-term deceleration in output growth. However, more recent research suggests that curbing fiscal imbalances contributes to faster growth already in the short term. This paper is about such non-Keynesian effects. Section two systematizes theoretical explanations. Section three reviews previous empirical research. Section four uses panel estimation techniques to examine the consequences of fiscal consolidation in New Member States. This analysis provides evidence that in those countries fiscal consolidation contributed substantially to the acceleration of output growth even in the short term. However, the exact channels through which non-Keynesian effects occurred could not be unambiguously identified in the paper. Section five takes the new step of a qualitative analysis of the outcomes of strong fiscal adjustments in the countries under consideration. That analysis shows that their experiences were quite similar to those of developed countries.
Subjects: 
fiscal consolidation
new Member States
non-Keynesian effects
JEL: 
E62
E65
C33
Document Type: 
Working Paper

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