text: On the Identification and Macroeconomic Effects of Discretionary Changes in Fiscal Policy Munich Personal RePEc Archive
  On the Identification and Macroeconomic Effects of Discretionary Changes in Fiscal Policy
  MPRA_paper_52056.pdf
  Empirical studies on the effects of fiscal adjustments apply different approaches to identify discretionary changes in fiscal policy. While the results of one strand of literature suggest that the effects of fiscal adjustments on GDP are small or even positive, particularly for spending cuts (expansionary austerity), this strand of literature is under criticism because of an incomplete cyclical adjustment strategy. I compare the macroeconomic effects of fiscal adjustments using five different identification strategies for a panel of 30 OECD countries over the period 1980 to 2012 and show that the strategy chosen for identifying fiscal policy has a crucial impact on the estimated effects. My results suggest that large fiscal adjustments (both revenue and spending based) lead to economic contractions, after appropriate controlling for cyclical effects and one-off capital transfers. These findings indicate that a great deal of previous empirical research on fiscal adjustments and expansionary austerity is based on an incomplete measure of fiscal policy and needs to be reevaluated.
  Fiscal Policy · Cyclical Adjustment · Government Expenditures
  09 Dec 2013 00:02
  27 Sep 2019 00:23
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