Fiscal Consolidation: Welfare Effects of the Adjustment Speed

Notas Económicas

Miguel Fonseca¹ 

[1] Nova School of Business and Economics;

关键词: Fiscal consolidation;    wealth inequality;    incomplete markets;   

DOI  :  10.14195/2183-203X_51_3

来源: DOAJ

【 摘 要 】

This article studies the response of social welfare to fiscal consolidations, by focusing on a less debated characteristic of fiscal plans: the speed of deleveraging. A neoclassical overlapping generations model is calibrated to the German economy, and a sequence of reductions of the same size in the debt‑ to GDP ratio are simulated considering different adjustment periods. Welfare gains are found to be larger in slow, delayed fiscal consolidations, due to the presence of incomplete markets. It is also found that the aggregate welfare response depends on the distribution of wealth and the type of fiscal instrument used.

【 授权许可】

Unknown