Modeling Optimal Fiscal Consolidation Paths in a Selection of European Countries
July 1, 2011
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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.
Subject: Fiscal consolidation, Fiscal multipliers, Fiscal policy, Fiscal stance, Fiscal sustainability, Output gap, Production
Keywords: a number of country, associated output gaps, country circumstances, country preference, debt-GDP ratio rise, Fiscal consolidation, Fiscal multipliers, Fiscal stance, Fiscal Sustainability, France, Germany, Global, implied country-preference, Ireland, Italy, Netherlands, Output gap, sustainability gap, U.K., WP
Pages:
23
Volume:
2011
DOI:
Issue:
164
Series:
Working Paper No. 2011/164
Stock No:
WPIEA2011164
ISBN:
9781462302208
ISSN:
1018-5941
