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Roland Straub - One of the best experts on this subject based on the ideXlab platform.
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Fiscal Consolidation in the euro area long run benefits and short run costs
Economic Modelling, 2008Co-Authors: Gunter Coenen, Matthias Mohr, Roland StraubAbstract:Abstract In this paper, we examine the macroeconomic effects of alternative Fiscal Consolidation policies in the New Area-Wide Model (NAWM), a two-country open-economy model of the euro area developed at the European Central Bank (cf. [Coenen, G., McAdam, P., Straub, R., in press. Tax reform and labour-market performance in the euro area: a simulation-based analysis using the New Area-Wide Model. Forthcoming in the Journal of Economic Dynamics and Control]). We model Fiscal Consolidation as a permanent reduction in the targeted government debt-to-output ratio and analyse both expenditure and revenue-based policies that are implemented by means of simple Fiscal feedback rules. We find that Fiscal Consolidation has positive long-run effects on key macroeconomic aggregates such as output and consumption, notably when the resulting improvement in the budgetary position is used to lower distortionary taxes. At the same time, Fiscal Consolidation gives rise to noticeable short-run adjustment costs in contrast to what the literature on expansionary Fiscal Consolidations suggests. Moreover, depending on the Fiscal instrument used, Fiscal Consolidation may have pronounced distributional effects.
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Fiscal Consolidation in the euro area long run benefits and short run costs
Social Science Research Network, 2008Co-Authors: Gunter Coenen, Matthias Mohr, Roland StraubAbstract:In this paper, we examine the macroeconomic effects of alternative Fiscal Consolidation policies in the New Area-Wide Model (NAWM), a two-country open-economy model of the euro area developed at the European Central Bank (cf. Coenen et al., 2007). We model Fiscal Consolidation as a permanent reduction in the targeted government debt-to-output ratio and analyse both expenditure and revenue-based policies that are implemented by means of simple Fiscal feedback rules. We find that Fiscal Consolidation has positive long-run effects on key macroeconomic aggregates such as output and consumption, notably when the resulting improvement in the budgetary position is used to lower distortionary taxes. At the same time, Fiscal Consolidation gives rise to noticeable short-run adjustment costs in contrast to what the literature on expansionary Fiscal Consolidations suggests. Moreover, depending on the Fiscal instrument used, Fiscal Consolidation may have pronounced distributional effects.
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Fiscal Consolidation in the euro area long run benefits and short run costs
Research Papers in Economics, 2008Co-Authors: Gunter Coenen, Matthias Mohr, Roland StraubAbstract:In this paper, we examine the macroeconomic effects of alternative Fiscal Consolidation policies in the New Area-Wide Model (NAWM), a two-country open-economy model of the euro area developed at the European Central Bank (cf. Coenen et al., 2007). We model Fiscal Consolidation as a permanent reduction in the targeted government debt-to-output ratio and analyse both expenditure and revenue-based policies that are implemented by means of simple Fiscal feedback rules. We find that Fiscal Consolidation has positive long-run effects on key macroeconomic aggregates such as output and consumption, notably when the resulting improvement in the budgetary position is used to lower distortionary taxes. At the same time, Fiscal Consolidation gives rise to noticeable short-run adjustment costs in contrast to what the literature on expansionary Fiscal Consolidations suggests. Moreover, depending on the Fiscal instrument used, Fiscal Consolidation may have pronounced distributional effects. JEL Classification: E32, E62
Douglas Sutherland - One of the best experts on this subject based on the ideXlab platform.
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Fiscal Consolidation part 4 case studies of large Fiscal Consolidation episodes
2012Co-Authors: Hansjorg Blochliger, Daeho Song, Douglas SutherlandAbstract:This paper provides an analysis of large and sustained Fiscal Consolidation episodes in OECD countries implemented between 1980 and 2000. It reviews how Fiscal policy variables evolved during these episodes, how Consolidation was influenced by the wider economic environment, and how the political economy side helped trigger and sustain Consolidation efforts. Results suggest that successful Consolidation – as measured by deficit reduction and debt stabilisation or decline – was driven by spending cuts and to a lesser extent by revenue increases. Most episodes started on a basis of improving competitiveness following currency depreciation and, in turn, favourable growth prospects, closing output gaps and – with some lag – falling unemployment. Interest rates started to decline two years after Consolidation had started, suggesting that it took some time to earn credibility. With regard to political economy, most Consolidation episodes were implemented shortly after an election. More than half of the governments that had started Consolidation were re-elected, and some even strengthened Consolidation efforts after then. In some cases, an incoming government of a different political colour pursued Consolidation. Consolidation budgetaire : Partie 4. Etudes de cas de redressements budgetaires passes de grande envergure Ce document analyse les phases anterieures de corrections budgetaires fortes et durables dans des pays de l’OCDE intervenues entre 1980 et 2000. Il examine l’evolution des variables de la politique budgetaire au cours de ces phases, l’influence de l’environnement economique global sur le redressement budgetaire et le role des considerations d’economie politique dans le declenchement et le maintien des efforts d’assainissement. Les resultats laissent penser qu’un programme de redressement reussi (reduction du deficit et stabilisation ou reduction de la dette) repose sur une contraction des depenses et, dans une moindre mesure, une augmentation des recettes. La plupart des corrections ont ete amorcees alors que la competitivite s’ameliorait a la suite d’une depreciation de la monnaie, induisant des perspectives de croissance plus favorables, une reduction des ecarts de production et, avec un certain decalage, un recul du chomage. Les taux d’interet ont commence a baisser deux ans apres le debut de la correction, ce qui montre qu’il faut un certain temps pour acquerir une credibilite. S’agissant d’economie politique, la plupart des corrections ont ete engagees peu apres une election. Plus de la moitie des gouvernements qui avaient amorce un resserrement ont ete reelus et certains l’ont meme accentue ensuite. Il est arrive aussi qu’un nouveau gouvernement poursuive l’action de redressement.
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Fiscal Consolidation part 3 long run projections and Fiscal gap calculations
Social Science Research Network, 2012Co-Authors: Rossana Merola, Douglas SutherlandAbstract:During the economic and financial crisis, Fiscal positions across the OECD countries deteriorated sharply. This raises the question of what level of primary deficit would ensure long-term sustainability and what degree of Consolidation is needed. The purpose of this paper is to gauge the scale of Fiscal Consolidation that will be needed to ensure long-term sustainability. The analysis uses so-called Fiscal gaps to provide a simple metric for how much Consolidation is needed under a series of different assumptions and scenarios. The aim is to highlight the scale of the problems, how they differ across countries and the uncertainties surrounding the estimates. A first set of results suggest that lower debt targets provide greater room for manoeuvre to react to shocks in the future. A second set of results shows that growth-enhancing structural reforms | especially reforms of pension systems | can mitigate budget pressures resulting from ageing populations and hence contribute to Fiscal Consolidation. Furthermore, raising efficiency in the provision of health care and education can reduce budgetary pressures. Finally, achieving debt objectives under shocks to interest rates or to government spending would require additional tightening in most of the OECD countries.
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Fiscal Consolidation part 3 long run projections and Fiscal gap calculations
2012Co-Authors: Rossana Merola, Douglas SutherlandAbstract:During the economic and financial crisis, Fiscal positions across the OECD countries deteriorated sharply. This raises the question of what level of primary deficit would ensure long-term sustainability and what degree of Consolidation is needed. The purpose of this paper is to gauge the scale of Fiscal Consolidation that will be needed to ensure long-term sustainability. The analysis uses so-called Fiscal gaps to provide a simple metric for how much Consolidation is needed under a series of different assumptions and scenarios. The aim is to highlight the scale of the problems, how they differ across countries and the uncertainties surrounding the estimates. A first set of results suggest that lower debt targets provide greater room for manoeuvre to react to shocks in the future. A second set of results shows that growth-enhancing structural reforms �| especially reforms of pension systems �| can mitigate budget pressures resulting from ageing populations and hence contribute to Fiscal Consolidation. Furthermore, raising efficiency in the provision of health care and education can reduce budgetary pressures. Finally, achieving debt objectives under shocks to interest rates or to government spending would require additional tightening in most of the OECD countries. Consolidation budgetaire: Partie 3. Projections a long terme et calcul des ecarts budgetaires Durant la crise economique et financiere, la position budgetaire des pays de l’OCDE s’est nettement degradee. La question se pose des lors de savoir quel niveau de deficit primaire assurerait la viabilite a long terme et quel degre d’assainissement est necessaire. Ce document a pour objet d’evaluer l’ampleur de l’effort de Consolidation budgetaire a consentir pour assurer la viabilite a long terme. L’analyse s’appuie sur les « ecarts budgetaires », qui permettent de mesurer simplement l’ampleur de l’assainissement necessaire suivant divers scenarios et hypotheses. L’objectif est de mettre en lumiere l’echelle des problemes, les differences qui existent d’un pays a l’autre et les incertitudes qui entourent les estimations. Une premiere serie de resultats semble indiquer que des objectifs de dette plus bas offrent une plus grande marge de manoeuvre pour reagir aux chocs dans l’avenir. Une seconde serie de resultats montre que des reformes structurelles propres a renforcer la croissance – en particulier les reformes des systemes de retraite – peuvent attenuer les pressions budgetaires dues aux vieillissement des populations et, partant, contribuer a l’assainissement des finances publiques. Par ailleurs, rehausser l’efficience dans la prestation de services de sante et d’education peut attenuer les pressions budgetaires. Enfin, des chocs affectant les taux d’interet ou les depenses publiques necessiteraient un resserrement budgetaire plus severe dans la plupart des pays de l’OCDE.
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Fiscal Consolidation how much how fast and by what means
OECD Economic Policy Papers, 2012Co-Authors: Douglas Sutherland, Peter Hoeller, Rossana MerolaAbstract:The economic and financial crisis was the catalyst for a Fiscal crisis that engulfs many OECD countries. Consolidating public finances in order to address the consequences of the crisis, underlying weaknesses and also future spending pressures creates important challenges. Fiscal Consolidation requires choices to be made about how much Consolidation is needed, how fast it should be implemented and which instruments should be used. Estimates of Fiscal gaps suggest that substantial and sustained Fiscal tightening will be needed in nearly all countries to bring debt down to prudent levels. However, given a weak global economy, implementing a large Fiscal tightening could be particularly costly. Structuring Consolidation packages to use instruments with low multipliers initially and enhancing the institutional framework for Fiscal policy to lend greater credibility to the commitment to consolidate over time may help minimise the trade-offs with growth in the short run. In most countries there is scope to target spending programmes more effectively and eliminate distortions in taxation. Such measures, buttressed by structural reforms, such as to unsustainable pension systems, can underpin Fiscal sustainability, while minimising the costs to long-run growth. Consolidation budgetaire : Quelle ampleur, quel rythme et quels moyens ? La crise economique et financiere a servi de catalyseur a une crise budgetaire qui submerge de nombreux pays de l’OCDE. Assainir les finances publiques pour faire face aux consequences de la crise, aux faiblesses sous-jacentes ainsi qu’aux pressions futures sur les depenses publiques represente un defi majeur pour bon nombre de pays. La Consolidation budgetaire implique des choix quant a l’ampleur de la Consolidation necessaire, au rythme auquel elle doit etre mise en œuvre et aux moyens a utiliser. Sur la base d’estimations des ecarts budgetaires, il semble qu’il faudra un resserrement budgetaire important et durable dans presque tous les pays pour ramener la dette a des niveaux prudents. Cependant, compte tenu de la faiblesse de l’economie mondiale, la mise en œuvre d’un vaste programme de restriction budgetaire pourrait etre particulierement couteuse. Structurer les programmes de Consolidation de facon a utiliser au depart des instruments a multiplicateurs faibles et, a terme, a ameliorer le cadre institutionnel de la politique budgetaire afin de rendre plus credible l’engagement a assainir les finances publiques pourrait aider a reduire au minimum les arbitrages avec la croissance a court terme. Dans la plupart des pays, il est possible de cibler plus efficacement les programmes de depenses et d’eliminer les distorsions de la Fiscalite. Ces mesures, etayees par des reformes structurelles telles que la reforme des systemes de retraite, qui ne sont plus tenables, peuvent soutenir la viabilite budgetaire tout en reduisant au minimum les couts pour la croissance a long terme.
Robert W R Price - One of the best experts on this subject based on the ideXlab platform.
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improving the Fiscal framework to enhance growth in an era of Fiscal Consolidation in slovakia
Research Papers in Economics, 2013Co-Authors: Caroline Klein, Robert W R Price, Andreas WorgotterAbstract:The challenge for Fiscal policy in Slovakia is to achieve Fiscal Consolidation in a way which supports the fragile recovery and protects spending on areas which are important for re-embarking on a trajectory of high trend growth and underpinning a catch-up in living standards. While the recently established Fiscal rules have significantly improved the Fiscal framework, a further strengthening in medium-term Fiscal discipline will be necessary to avoid pro-cyclical Fiscal policy. Raising the effectiveness of tax collection, reforming the tax structure towards less distortive taxes and making more out of available EU funds would also play a helpful role in a growth-friendly Fiscal Consolidation. Finally, more needs to be done to ensure an adequate prioritisation of spending and an efficient use of public revenues. In particular, stepping up the analytical monitoring, evaluation and assessment capacity in spending ministries should help to rein in wasteful spending. This Working Paper relates to the 2012 OECD Economic Survey of the Slovak Republic (www.oecd.org/eco/surveys/slovakia2012).
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the political economy of Fiscal Consolidation
Social Science Research Network, 2011Co-Authors: Robert W R PriceAbstract:This paper explores the political economy of Fiscal adjustment. It begins with an examination of the evidence for, and sources of, ‘deficit bias’, including political and governance factors, public attitudes, the role of financial markets and imprecision about which debt targets should be pursued. It then examines the evidence regarding the exogenous and policy-related factors which affect the success of Fiscal Consolidation efforts. This is followed by a discussion of the role of Fiscal institutions, including Fiscal rules and autonomous agencies. The final section considers how the political economy of Fiscal policy has changed with the financial crisis, giving some indications as to what may be needed to re-establish a Consolidation path and make it less prone to setbacks.
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interactions between monetary and Fiscal policy how monetary conditions affect Fiscal Consolidation
Research Papers in Economics, 2006Co-Authors: Rudiger Ahrend, Pietro Catte, Robert W R PriceAbstract:This paper assesses how and in what circumstances, Fiscal Consolidations are affected by monetary conditions, using data covering 24 OECD countries over the past 25 years, Focusing on Fiscal Consolidation “episodes”, it is found that these tend to occur when large budget deficits threaten sustainability and usually when other macroeconomic indicators -- inflation, the exchange rate and unemployment -- suggest a “crisis” situation. After controlling for these factors, the paper finds strong econometric evidence that Consolidation efforts are more likely to be pursued and to succeed if the monetary policy stance is eased in the initial stages of the episode, thus contributing to offsetting the contractionary impact of Fiscal tightening. However, the link is far from mechanical and there are also counter-examples where monetary easing was followed by aborted Consolidation efforts. Central bank independence explicitly precludes direct responses of monetary policy to Fiscal actions. However, the paper also provides evidence that the indirect reaction of monetary policy and financial markets to Fiscal Consolidation may be influenced by the quality of Fiscal adjustment, as short and long-term interest rates are more likely to fall during episodes characterised by greater reliance on current expenditure cuts. While this means that causality runs both ways, the paper provides evidence that, even after controlling for this proxy of Fiscal adjustment quality, changes in monetary stance do affect the chances that a Fiscal retrenchment plan will be successfully pursued. Interactions entre la politique monetaire et budgetaire : L'effet des conditions monetaires sur les Consolidations budgetaires Cet article, utilisant des donnees relatives a 24 pays de l’OCDE sur les 25 dernieres annees, examine comment et dans quelles circonstances des ajustements budgetaires sont affectes par les conditions monetaires. Les ajustements budgetaires interviennent le plus souvent lorsque d’importants deficits menacent la soutenabilite des finances publiques, ou lorsque d'autres indicateurs macroeconomiques -- inflation, taux de change ou niveau de chomage -- sont tres degrades. En controlant ces variables, l’article apporte des preuves econometriques robustes suivant lesquelles les efforts de Consolidation budgetaire ont davantage de chance d’etre mis en oeuvre et couronnes de succes si la politique monetaire est accommodante dans la periode initiale de l’ajustement, contribuant ainsi a amortir l’effet defavorable pour la croissance du resserrement budgetaire. Le lien n’est cependant pas mecanique, comme l’atteste l’existence d’episodes de desserrement monetaire suivis d’un abandon des efforts d’ajustement Fiscal. Par ailleurs, si l’independance des banques centrales fait explicitement obstacle a une reponse directe de la politique monetaire aux operations budgetaires, l’article montre que la qualite de l’ajustement Fiscal peut indirectement influer sur les banques centrales et les marches financiers. Par exemple, les taux d'interet a court et long terme semblent se replier davantage si l’ajustement budgetaire prend la forme d’une maitrise stricte des depenses courantes. Au total, l’influence entre l’ajustement budgetaire et la conduite de la politique monetaire est reciproque mais l’article montre que, meme en controlant la qualite d'ajustement budgetaire, la politique monetaire continue a influencer la probabilite d’une Consolidation des finances publiques d’etre menee a bien.
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interactions between monetary and Fiscal policy how monetary conditions affect Fiscal Consolidation
Social Science Research Network, 2006Co-Authors: Rudiger Ahrend, Pietro Catte, Robert W R PriceAbstract:This paper assesses how and in what circumstances, Fiscal Consolidations are affected by monetary conditions, using data covering 24 OECD countries over the past 25 years, Focusing on Fiscal Consolidation “episodes”, it is found that these tend to occur when large budget deficits threaten sustainability and usually when other macroeconomic indicators -- inflation, the exchange rate and unemployment -- suggest a “crisis” situation. After controlling for these factors, the paper finds strong econometric evidence that Consolidation efforts are more likely to be pursued and to succeed if the monetary policy stance is eased in the initial stages of the episode, thus contributing to offsetting the contractionary impact of Fiscal tightening. However, the link is far from mechanical and there are also counter-examples where monetary easing was followed by aborted Consolidation efforts. Central bank independence explicitly precludes direct responses of monetary policy to Fiscal actions. However, the paper also provides evidence that the indirect reaction of monetary policy and financial markets to Fiscal Consolidation may be influenced by the quality of Fiscal adjustment, as short and long-term interest rates are more likely to fall during episodes characterised by greater reliance on current expenditure cuts. While this means that causality runs both ways, the paper provides evidence that, even after controlling for this proxy of Fiscal adjustment quality, changes in monetary stance do affect the chances that a Fiscal retrenchment plan will be successfully pursued.
Gunter Coenen - One of the best experts on this subject based on the ideXlab platform.
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Fiscal Consolidation in the euro area long run benefits and short run costs
Economic Modelling, 2008Co-Authors: Gunter Coenen, Matthias Mohr, Roland StraubAbstract:Abstract In this paper, we examine the macroeconomic effects of alternative Fiscal Consolidation policies in the New Area-Wide Model (NAWM), a two-country open-economy model of the euro area developed at the European Central Bank (cf. [Coenen, G., McAdam, P., Straub, R., in press. Tax reform and labour-market performance in the euro area: a simulation-based analysis using the New Area-Wide Model. Forthcoming in the Journal of Economic Dynamics and Control]). We model Fiscal Consolidation as a permanent reduction in the targeted government debt-to-output ratio and analyse both expenditure and revenue-based policies that are implemented by means of simple Fiscal feedback rules. We find that Fiscal Consolidation has positive long-run effects on key macroeconomic aggregates such as output and consumption, notably when the resulting improvement in the budgetary position is used to lower distortionary taxes. At the same time, Fiscal Consolidation gives rise to noticeable short-run adjustment costs in contrast to what the literature on expansionary Fiscal Consolidations suggests. Moreover, depending on the Fiscal instrument used, Fiscal Consolidation may have pronounced distributional effects.
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Fiscal Consolidation in the euro area long run benefits and short run costs
Social Science Research Network, 2008Co-Authors: Gunter Coenen, Matthias Mohr, Roland StraubAbstract:In this paper, we examine the macroeconomic effects of alternative Fiscal Consolidation policies in the New Area-Wide Model (NAWM), a two-country open-economy model of the euro area developed at the European Central Bank (cf. Coenen et al., 2007). We model Fiscal Consolidation as a permanent reduction in the targeted government debt-to-output ratio and analyse both expenditure and revenue-based policies that are implemented by means of simple Fiscal feedback rules. We find that Fiscal Consolidation has positive long-run effects on key macroeconomic aggregates such as output and consumption, notably when the resulting improvement in the budgetary position is used to lower distortionary taxes. At the same time, Fiscal Consolidation gives rise to noticeable short-run adjustment costs in contrast to what the literature on expansionary Fiscal Consolidations suggests. Moreover, depending on the Fiscal instrument used, Fiscal Consolidation may have pronounced distributional effects.
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Fiscal Consolidation in the euro area long run benefits and short run costs
Research Papers in Economics, 2008Co-Authors: Gunter Coenen, Matthias Mohr, Roland StraubAbstract:In this paper, we examine the macroeconomic effects of alternative Fiscal Consolidation policies in the New Area-Wide Model (NAWM), a two-country open-economy model of the euro area developed at the European Central Bank (cf. Coenen et al., 2007). We model Fiscal Consolidation as a permanent reduction in the targeted government debt-to-output ratio and analyse both expenditure and revenue-based policies that are implemented by means of simple Fiscal feedback rules. We find that Fiscal Consolidation has positive long-run effects on key macroeconomic aggregates such as output and consumption, notably when the resulting improvement in the budgetary position is used to lower distortionary taxes. At the same time, Fiscal Consolidation gives rise to noticeable short-run adjustment costs in contrast to what the literature on expansionary Fiscal Consolidations suggests. Moreover, depending on the Fiscal instrument used, Fiscal Consolidation may have pronounced distributional effects. JEL Classification: E32, E62
Stephen Snudden - One of the best experts on this subject based on the ideXlab platform.
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Fiscal Consolidation in the euro area how much pain can structural reforms ease
Journal of Policy Modeling, 2014Co-Authors: Derek Anderson, Benjamin L Hunt, Stephen SnuddenAbstract:Abstract The IMF's Global Integrated Monetary and Fiscal model (GIMF) is used to examine the scope for structural reforms in the euro area to offset the negative impact of Fiscal Consolidation required to put public debt back on a sustainable path. The results suggest that structural reforms in core countries could be expected to offset the near-term negative impact on activity arising from the required Fiscal Consolidation. However, for the periphery, the results suggest that it would take several years before structural reforms could return the level of output back to its pre-Consolidation path.
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Fiscal Consolidation in the euro area how much can structural reforms ease the pain
International Organisations Research Journal, 2014Co-Authors: Derek Anderson, Ben Hunt, Stephen SnuddenAbstract:Derek Anderson - Graduate Student, Department of Economics, University of Virginia; 248 McCormick Rd,22903, Charlottesville, VA, USA; E-mail: dta7dk@virginia.eduBen Hunt - Advisor in the Research Department, The International Monetary Fund; 700, 19th St., 20431, N.W.,Washington, D.C., USA; E-mail: bhunt@imf.orgStephen Snudden - Project Officer in the Research Department, The International Monetary Fund; 700, 19th St.,20431, N.W., Washington, D.C., USA; E-mail: ssnudden@imf.orgSeveral euro area countries must implement substantial Fiscal Consolidation to put public finances back on a sustainable path. Although this required Consolidation will improve long-run output prospects, in the short run, the impact on activity is likely to be negative. Simultaneously implementing structural reforms to raise growth could be one way to help mitigate the short-run negative impact on GDP. This paper uses the IMF’s Global Integrated Monetary and Fiscal Model (GIMF) to provide some estimates of how effective structural reforms might be in softening the near-term contractionary effects of euro area Fiscal Consolidation. For the analysis, the euro area is divided into two regions, one with acute Fiscal sustainability issues, referred to as the periphery, and one with less acute sustainability issues, referred as the core. The magnitudes and the timing of the required Consolidation are stylized, but loosely based on the Consolidations contained in the April 2013 World Economic Outlook. Although the macroeconomic impacts of Consolidations in the two regions that are achieved by reducing transfers are presented, it is highly unlikely that the Consolidations can be achieved in such a growth-friendly fashion. Therefore, results are also presented for Consolidations of identical magnitudes that are achieved by using a mix of public absorption expenditure (30 percent), consumption taxes (30 percent), labor income taxes (30 percent) and capital income taxes (10 percent). This more plausible mix of Fiscal instruments reduces GDP below its reConsolidation level in both the periphery and core for an extended period. GIMF is then used to estimate the scope for offsetting that impact on activity through implementing wide-ranging structural reforms. The GIMF analysis relies on OECD estimates of the distance from best practice in product and labor market polices in each euro area country along with estimates of the impact on productivity and employment of closing those gaps. The impact on output is estimated under two alternative assumptions about how much of the best-practice gap is closed, a lower bound of 25 percent and an upper bound of 75 percent. The results suggest that for the core, it is quite feasible that structural reforms can offset even the near-term negative impact of Consolidation on activity. However, for the periphery, even under the case where 75 percent of the best-practice gap is closed, it takes several years before GDP is restored to its pre-Consolidation level. In the medium and longer term, however, the estimates suggests that structural reforms can make a substantial contribution to raising output in both the core and periphery.
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Fiscal Consolidation in the euro area how much can structural reforms ease the pain
Research Papers in Economics, 2013Co-Authors: Derek Anderson, Ben Hunt, Stephen SnuddenAbstract:The IMF’s Global Integrated Monetary and Fiscal model (GIMF) is used to examine the scope for structural reforms in the euro area to offset the negative impact of Fiscal Consolidation required to put public debt back on a sustainable path. The results suggest that structural reforms in core countries could quite reasonably be expected to offset the near term negative impact on activity arising from the required Fiscal Consolidation that uses a plausible mix of instruments to achieve the permanent improvement in the deficit. However, for the periphery, where the required Consolidation is roughly twice as large as that required in the core, the results suggest that it would take several years before structural reforms could return the level of output back to its pre-Consolidation path.
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effects of Fiscal Consolidation in the czech republic
Research Papers in Economics, 2011Co-Authors: Stephen Snudden, Vladimir KlyuevAbstract:This paper uses the IMF’s Global Integrated Monetary and Fiscal Model (GIMF) to assess the impact of Fiscal Consolidation on the Czech economy. Its contribution is threefold. First, it provides estimates of dynamic Fiscal multipliers for a variety of Fiscal instruments (tax and expenditure), Consolidation durations, assumptions about credibility, and monetary policy responses. Second, the paper evaluates the impact on the economy of tightening measures envisaged in the 2011 budget. Third, the paper considers alternative packages for Consolidation beyond 2011 to achieve the government’s balanced budget target by 2016 and identifies which forms of adjustment are more "growth-friendly".