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Expansionary Fiscal Austerity: New International Evidence

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dc.contributor.authorNie, Ou
dc.date.accessioned2020-07-30T16:53:41Z
dc.date.available2020-07-30T16:53:41Z
dc.date.issued2020-07
dc.description.abstractThe expansionary fiscal contraction (EFC) hypothesis states that fiscal austerity can increase output or consumption when a country is under heavy debt burdens because it sends positive signal about the country's solvency situation and long-term economic wellbeing. Empirical tests of this hypothesis have suffered from identification concerns due to data sources and empirical methodology. Using a sample of OECD countries between 1978 and 2014, this paper combines new IMF narrative data and the proxy structural Vector Auto-regression (SVAR) method to examine whether fiscal austerities can be expansionary when debt levels are high. Fiscal austerities are measured as 1) narrative fiscal shocks and 2) structural shocks from a proxy SVAR. Additionally, this paper uses a model-based approach to determine the cutoff debt level beyond which EFC is expected to be observed. This paper finds empirical evidence in support of the EFC hypothesis for OECD countries: results for output are driven by changes in tax rates and are robust to how one defines a high-debt regime and how one measures austerity.en
dc.identifierhttp://documents.worldbank.org/curated/en/430691596113581519/Expansionary-Fiscal-Austerity-New-International-Evidence
dc.identifier.doi10.1596/1813-9450-9344
dc.identifier.urihttps://hdl.handle.net/10986/34262
dc.languageEnglish
dc.publisherWorld Bank, Washington, DC
dc.relation.ispartofseriesPolicy Research Working Paper;No. 9344
dc.rightsCC BY 3.0 IGO
dc.rights.holderWorld Bank
dc.rights.urihttp://creativecommons.org/licenses/by/3.0/igo
dc.subjectFISCAL POLICY
dc.subjectFISCAL CONSOLIDATION
dc.subjectSTRUCTURAL VECTOR AUTOREGRESSION
dc.subjectDEBT SUSTAINABILITY
dc.subjectECONOMIC CRISIS
dc.subjectFISCAL SHOCK
dc.subjectECONOMIC SHOCK
dc.subjectAUSTERITY
dc.subjectDEBT BURDEN
dc.titleExpansionary Fiscal Austerityen
dc.title.subtitleNew International Evidenceen
dc.typeWorking Paperen
dc.typeDocument de travailfr
dc.typeDocumento de trabajoes
dspace.entity.typePublication
okr.crossref.titleExpansionary Fiscal Austerity: New International Evidence
okr.date.disclosure2020-07-30
okr.doctypePublications & Research
okr.doctypePublications & Research::Policy Research Working Paper
okr.docurlhttp://documents.worldbank.org/curated/en/430691596113581519/Expansionary-Fiscal-Austerity-New-International-Evidence
okr.guid430691596113581519
okr.identifier.doi10.1596/1813-9450-9344
okr.identifier.externaldocumentum090224b087c2947d_1_0
okr.identifier.internaldocumentum32287322
okr.identifier.reportWPS9344
okr.importedtrueen
okr.language.supporteden
okr.pdfurlhttp://documents.worldbank.org/curated/en/430691596113581519/pdf/Expansionary-Fiscal-Austerity-New-International-Evidence.pdfen
okr.statistics.combined1650
okr.statistics.dr430691596113581519
okr.statistics.drstats970
okr.topicInternational Economics and Trade::External Debt
okr.topicMacroeconomics and Economic Growth::Fiscal Adjustment
okr.topicMacroeconomics and Economic Growth::Macroeconomic Management
okr.unitFinance, Competitiveness and Innovation Global Practice
relation.isSeriesOfPublication26e071dc-b0bf-409c-b982-df2970295c87
relation.isSeriesOfPublication.latestForDiscovery26e071dc-b0bf-409c-b982-df2970295c87
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