Modeling Optimal Fiscal Consolidation Paths in a Selection of European Countries

Author/Editor: Daniel Kanda
Publication Date: July 01, 2011
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate
Summary: For a number of countries - Italy, Netherlands, the United Kingdom, Germany, Ireland, and France - this paper develops an inter-temporal model that elicits the implied country-preferences over balancing the conflicting objectives of fiscal consolidation and reduction of economic slack. The model suggests that some front-loading of adjustment is desirable, although the extent would vary by country preferences. It also finds that proposed consolidations may prove to be stronger than acceptable, especially if somewhat larger than anticipated fiscal multipliers lead to a sizeable economic deceleration.
Series: Working Paper No. 11/164
Subject(s): Developed countries | Economic models | Fiscal consolidation | Fiscal sustainability

Author's Keyword(s): Fiscal Sustainability | Italy | Netherlands | U.K. | Germany | Ireland | France
Publication Date: July 01, 2011
ISBN/ISSN: 9781462302208/1018-5941 Format: Paper
Stock No: WPIEA2011164 Pages: 23
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