Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/204781 
Year of Publication: 
2019
Citation: 
[Journal:] Economics: The Open-Access, Open-Assessment E-Journal [ISSN:] 1864-6042 [Volume:] 13 [Issue:] 2019-42 [Publisher:] Kiel Institute for the World Economy (IfW) [Place:] Kiel [Year:] 2019 [Pages:] 1-19
Publisher: 
Kiel Institute for the World Economy (IfW), Kiel
Abstract: 
This article brings empirical evidence on the effect of fiscal consolidation in decentralized countries. The focus on Spain is justified by three reasons. First, it is one of the OECD countries most affected by the Great recession in terms of both GDP and public deficit. Second, Spain is one of the most decentralized countries in the world. Third, compliance with fiscal consolidation targets has been very diverse across regions. Using both time series econometrics and the Synthetic Control Method approach (SCM), we show that compliance with fiscal targets at the regional level has not involved lower GDP growth rates in the short-run. Openness and economic integration of regional economies involve that fiscal multipliers tend to fade. Hence, while a fiscal stimulus would not work on this scale, the opposite is also true: the potentially negative demand effects of a stronger regional fiscal consolidation strategy would be exported to other regions.
Subjects: 
fiscal consolidation
regional economic growth
Great recession
JEL: 
H74
R11
H62
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

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