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The (non-)Keynesian effects of fiscal austerity: New evidence from a large sample
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Orientador(es)
Resumo(s)
We empirically assess whether the negative response of private consumption and private investment
to fiscal consolidation usually expected is reversed. We focus on a sample of 174
countries between 1970 and 2018 to determine episodes of fiscal consolidations using three
alternative measures of the cyclically adjusted primary balance: (1) an International Monetary
Fund (IMF)-World Economic Outlook (WEO) based measure, (2) a Hodrick-Prescott–based
measure, and (3) a measure based on Hamilton (2018). We find that, first, increases in government
consumption have a Keynesian effect on real per capita private consumption; second, tax
increases have a positive effect on private consumption when a fiscal consolidation occurs; and,
third, fiscal contraction has a crowding-in effect on private investment. Moreover, expansionary
fiscal consolidations occur in highly indebted advanced economies, in particular, after an increase
in taxes. We conclude that the negative effects of taxation on private consumption are larger
when developing economies are experiencing a financial crisis and are not consolidating.
Descrição
Palavras-chave
Consumption Endogeneity Filtering Financial Crises Fiscal Consolidation Investment Non-Keynesian Effects Panel Data
Contexto Educativo
Citação
Afonso, António; José Alves and João Tovar Jalles.(2022). "The (non-) Keynesian effects of fiscal austerity: New evidence from a large sample." Economic Systems, Vol. 46: 100981.
Editora
Elsevier