Beetsma, Roel, Furtuna, Oana, Giuliodori, Massimo, (2017), “Differences in follow-up help to explain why revenue-based consolidation plans appear more recessionary than spending-based plans”, VoxEU, 5 September
Research has shown that planned fiscal consolidations have been less recessionary when carried out through public spending cuts rather than through increases in government revenues. This column argues that this may be at least partly due to differences in follow-up for the two consolidation strategies. Better follow-up of announced spending contractions may result in negative Keynesian responses similar to those that follow announced revenue increases, and so they may not necessarily provide a ‘cheaper’ route to budgetary consolidation than revenue increases.
Relevant Posts
- Cantore, Cristiano, Melina, Giovanni, Pearlman, Joseph G, Levine, Paul L, (2017), «Optimal Fiscal and Monetary Policy, Debt Crisis and Management», IMF Working Paper 17/78, 30 March 2017
- Mulas-Granados, Carlos, Jalles, João Tovar, Schena, Michela, Gupta, Sanjeev, (2017), «Governments and Promised Fiscal Consolidations : Do They Mean What They Say?», IMF Working Papers No. 17/39, 23 February