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Fiscal tightening and economic growth – exploring cross-country correlations

Mauro, Paolo, Zilinsky, Jan, (2015), “Fiscal tightening and economic growth – exploring cross-country correlations”, Voxeu, 18 Σεπτεμβρίου

The public narrative on austerity is shaped by simple scatter plots purporting to portray the large negative impact of fiscal ‘austerity’ on economic growth. This column argues that, while recognising concerns about causality, economists should systematically explore correlations and multiple regressions, and test their robustness. The results reveal a mixed picture, lending partial support to the notion that fiscal choices and output growth are empirically associated.

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