Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/77687
Authors: 
Bursian, Dirk
Weichenrieder, Alfons
Zimmer, Jochen
Year of Publication: 
2013
Series/Report no.: 
CESifo Working Paper 4310
Abstract: 
The paper looks at the determinants of fiscal adjustments as reflected in the primary surplus of countries. Our conjecture is that governments will usually find it more attractive to pursue fiscal adjustments in a situation of relatively high growth, but based on a simple stylized model of government behavior the expectation is that mainly high trust governments will be in a position to defer consolidation to years with higher growth. Overall, our analysis of a panel of European countries provides support for this expectation. The difference in fiscal policies depending on government trust levels may help explaining why better governed countries have been found to have less severe business cycles. It suggests that trust and credibility play an important role not only in monetary policy, but also in fiscal policy.
Subjects: 
trust
debt sustainability
fiscal reaction function
euro area
EU
JEL: 
H62
E62
Document Type: 
Working Paper

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