Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/203995
Authors: 
Heimberger, Philipp
Year of Publication: 
2016
Series/Report no.: 
wiiw Working Paper No. 130
Abstract: 
Abstract This paper analyses the short-run effects of fiscal consolidation measures on economic activity in the euro area during the euro crisis. It presents new econometric estimates on the link between cumulative GDP growth and fiscal austerity measures during 2011-2013. The main empirical finding is that the depth of the economic crisis in the euro area's economies is closely related to the harshness of fiscal austerity. Cumulative multiplier estimates are found to vary in a range from 1.4 to 2.1, depending on the data source used to identify the intensity of fiscal consolidation. Given these multiplier values, a reasonable approximation of the size of the output losses due to fiscal austerity in the euro area during 2011-2013 is in the range of 5.5% to 8.4% of GDP. Against the background of the prevailing macroeconomic and institutional circumstances, fiscal consolidation is argued to be the cause of the double-dip recession.
Subjects: 
fiscal policy
fiscal multiplier
fiscal consolidation
austerity
growth
eurozone
JEL: 
E61
E62
E63
Document Type: 
Working Paper

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