## Assessing the Impact and Phasing of Multi-year Fiscal Adjustment: A General Framework

_IMF Working Papers, August 21, 2013_

## Source details

**Canonical URL:** [Assessing the Impact and Phasing of Multi-year Fiscal Adjustment: A General Framework](https://www.imf.org/en/publications/wp/issues/2016/12/31/assessing-the-impact-and-phasing-of-multi-year-fiscal-adjustment-a-general-framework-40884)

## Other formats

- [Markdown version](/en/publications/wp/issues/2016/12/31/assessing-the-impact-and-phasing-of-multi-year-fiscal-adjustment-a-general-framework-40884/index.md)
- [Structured JSON version](/en/publications/wp/issues/2016/12/31/assessing-the-impact-and-phasing-of-multi-year-fiscal-adjustment-a-general-framework-40884/index.json)
- [Bundle manifest](/en/publications/wp/issues/2016/12/31/assessing-the-impact-and-phasing-of-multi-year-fiscal-adjustment-a-general-framework-40884/bundle-manifest.json)

## Bibliographic details
- Authors: Ran Bi, Haonan Qu, James Roaf
- Published: August 21, 2013
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781484318669.001

---

### Framework and methodology
- Provides a general framework to assess output and debt dynamics of an economy undertaking multi-year fiscal adjustment.
- Allows country-specific assumptions about:
  - the magnitude and persistence of fiscal multipliers,
  - hysteresis effects,
  - endogenous financing costs.
- Designed to inform macro projections and shed light on appropriate phasing of fiscal consolidation (front-loaded versus back-loaded).
- Applied to stylized advanced and emerging economy examples.

### Major findings
- For a highly-indebted economy undertaking large multi-year fiscal consolidation, high multipliers do not always argue against frontloaded adjustment.
- The case for more gradual or back-loaded adjustment is strongest when hysteresis effects are in play, but this must be balanced against implications for debt sustainability.
- Application to actual country examples tends to cast doubt on claims that very large multipliers have been operating post-crisis.
- It appears that GDP forecast errors for Greece may have been due more to over-optimism on potential growth estimates than to underestimating fiscal multipliers.

### Policy implications and considerations
- Phasing decisions (front-loaded vs. back-loaded) should weigh:
  - country-specific fiscal multiplier estimates,
  - the presence and magnitude of hysteresis effects,
  - endogenous financing cost responses,
  - debt sustainability constraints for highly indebted economies.
- High multipliers alone do not automatically imply that consolidation should be back-loaded; assessment must consider debt dynamics and sustainability trade-offs.

### Application and scope
- Framework applied to stylized advanced and emerging economy examples to illustrate interactions among multipliers, hysteresis, and financing costs.
- Also applied to actual country examples to evaluate post-crisis multiplier claims and forecast errors.

---

## Content in this bundle

- **Microsoft Word - DMSDR1S-#5095902-v9-SPREM_2013_WP_Fiscal_Multipliers_-_February.DOCX**
  - [Microsoft Word - DMSDR1S-#5095902-v9-SPREM_2013_WP_Fiscal_Multipliers_-_February.DOCX (Markdown version)](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2013/_wp13182.pdf.md){rel="alternate" type="text/markdown"}
  - [Microsoft Word - DMSDR1S-#5095902-v9-SPREM_2013_WP_Fiscal_Multipliers_-_February.DOCX (PDF)](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2013/_wp13182.pdf){rel="external" type="application/pdf"}

---

_Source: https://www.imf.org/en/publications/wp/issues/2016/12/31/assessing-the-impact-and-phasing-of-multi-year-fiscal-adjustment-a-general-framework-40884_