Expansionary Fiscal Austerity : New International Evidence

Nie, Ou

World Bank, Washington, DC

关键词: FISCAL POLICY;    FISCAL CONSOLIDATION;    STRUCTURAL VECTOR AUTOREGRESSION;    DEBT SUSTAINABILITY;    ECONOMIC CRISIS;   

DOI  :  10.1596/1813-9450-9344
RP-ID  :  WPS9344

学科分类：社会科学、人文和艺术（综合）

来源: World Bank Open Knowledge Repository

【 摘 要 】

The expansionary fiscal contraction(EFC) hypothesis states that fiscal austerity can increaseoutput or consumption when a country is under heavy debtburdens because it sends positive signal about thecountry's solvency situation and long-term economicwellbeing. Empirical tests of this hypothesis have sufferedfrom identification concerns due to data sources andempirical methodology. Using a sample of OECD countriesbetween 1978 and 2014, this paper combines new IMF narrativedata and the proxy structural Vector Auto-regression (SVAR)method to examine whether fiscal austerities can beexpansionary when debt levels are high. Fiscal austeritiesare measured as 1) narrative fiscal shocks and 2) structuralshocks from a proxy SVAR. Additionally, this paper uses amodel-based approach to determine the cutoff debt levelbeyond which EFC is expected to be observed. This paperfinds empirical evidence in support of the EFC hypothesisfor OECD countries: results for output are driven by changesin tax rates and are robust to how one defines a high-debtregime and how one measures austerity.