Bericht
Fiscal multipliers and beyond
This paper seeks to link the debate surrounding short-term fiscal multipliers with the medium and longer-term impact of fiscal consolidation on public debt sustainability. A literature review and empirical findings for state-dependent multipliers confirm that there is considerable uncertainty surrounding the size of the short-term multiplier. Notably, multipliers may be larger in deep recessions or financial crises, but the negative impact of fiscal consolidation is mitigated when public finances are weak. Using a stylised framework and a range of plausible values for the fiscal multiplier, simulations suggest that an increase in the debt ratio following episodes of fiscal consolidation is likely to be short-lived. Even in a macroeconomic context in which multipliers are high, a front-loaded fiscal consolidation reduces the total consolidation effort and implies a faster stabilisation of the debt ratio. In general, back-loading is subject to higher implementation risks, most notably in the light of political economy considerations. Overall, when determining the fiscal adjustment path, both the short-term costs and the longer-term benefits need to be taken into account. Particular attention should be paid to the composition of consolidation packages, with well-designed adjustments likely to imply a faster stabilisation of the debt ratio.
- Sprache
-
Englisch
- Erschienen in
-
Series: ECB Occasional Paper ; No. 162
- Klassifikation
-
Wirtschaft
Fiscal Policies and Behavior of Economic Agents: General
- Thema
-
fiscal policies
Government debt
Macroeconomic Aspects of Public Finance
Sustainability
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Warmedinger, Thomas
Checherita-Westphal, Cristina
Hernández de Cos, Pablo
- Ereignis
-
Veröffentlichung
- (wer)
-
European Central Bank (ECB)
- (wo)
-
Frankfurt a. M.
- (wann)
-
2015
- Handle
- Letzte Aktualisierung
-
10.03.2025, 11:44 MEZ
Datenpartner
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.
Objekttyp
- Bericht
Beteiligte
- Warmedinger, Thomas
- Checherita-Westphal, Cristina
- Hernández de Cos, Pablo
- European Central Bank (ECB)
Entstanden
- 2015
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