Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/183360
Authors: 
Beetsma, Roel
Furtuna, Oana
Giuliodori, Massimo
Year of Publication: 
2018
Series/Report no.: 
ECB Working Paper 2178
Abstract: 
The literature on fiscal multipliers finds that spending-based fiscal consolidations tend to have more benign macro-economic consequences than revenue-based consolidations. By directly comparing ex-post data with consolidation plans, we present evidence of a systematically weaker follow-up of spending-based consolidation plans. Next, using a newly-developed dataset of consolidation announcements, panel VAR regressions confirm the weaker follow-up of spending-based plans and their more benign macro-economic effects compared to those of revenue-based plans. We disentangle the role of the difference in follow-up from that of the difference in the composition of revenue- and spending-based consolidations. While the latter channel, which works through the difference between revenue and spending multipliers, explains the largest fraction of the difference in economic trajectories, the difference in follow-up plays a non-negligible role as well.
Subjects: 
fiscal consolidation announcements
follow-up
fiscal multipliers
panel vector auto-regression
narrative identification
JEL: 
E21
E62
H5
Persistent Identifier of the first edition: 
ISBN: 
978-92-899-3283-7
Document Type: 
Working Paper

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