Fiscal Restructuring in the Group of Seven Major Industrial Countries in the 1990's: Macroeconomic Effects


Leonardo Bartolini ; Steven A. Symansky ; Assaf Razin

Publication Date:

March 1, 1995

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


This paper studies the fiscal restructuring of the first half of the 1990s in the major industrial countries. It presents and calibrates a simple model of the labor market and integrates it into a multi-country macroeconomic model that takes into account the effects of distortionary taxes. It then uses the resulting framework to simulate the effects of recent and prospective changes in fiscal policies in the group of seven major industrial countries. The analysis suggests that in the long run the impact on output is likely to be positive in those countries that relied relatively more on expenditure cuts or indirect tax increases (such as Canada, France, Japan, and the United Kingdom), while the effect of the fiscal restructuring on output is estimated to be negative in those countries that relied primarily on labor and capital taxes (Germany, Italy, and the United States).


Working Paper No. 1995/035



Publication Date:

March 1, 1995



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