An evaluation of alternative fiscal adjustment plans: The case of Italy

Acocella, Nicola; Beqiraj, Elton; Bartolomeo, Giovanni Di; Pietro, Marco Di; Felici, Francesco

doi:10.1016/j.jpolmod.2019.07.007

Cited by 9 publications

(6 citation statements)

References 30 publications

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“…In Alesina, Favero, and Giavazzi (2019), we addressed endogeneity using the narrative approach. 3 We have documented close to 200 exogenous austerity plansthat is plans not adopted by considerations related to the business cycle-in 16 OECD 3 Jordá and Taylor (2016) use narratively identified shifts in fiscal variables as an instrument for studying the effects of the changes in the cyclically adjusted fiscal balance. They overlook the difference between tax-based and expenditure-based austerity and concentrate on the issue of the recessionary versus expansionary effect of fiscal consolidations.…”

Section: Endogeneitymentioning

confidence: 93%

Effects of Austerity: Expenditure- and Tax-based Approaches

Alesina

Favero

Giavazzi

2019

Journal of Economic Perspectives

120

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We review the debate surrounding the macroeconomic effects of deficit reduction policies (austerity). The discussion about "austerity" in general has distracted commentators and policymakers from a very important result, namely the enormous difference, on average, between expenditure- and tax-based austerity plans. Spending-based austerity plans are remarkably less costly than tax-based plans. The former have on average a close to zero effect on output and lead to a reduction of the debt/GDP ratio. Tax-based plans have the opposite effect and cause large and long-lasting recessions. These results also apply to the recent episodes of European austerity, which in this respect were not especially different from previous cases.

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Section: Endogeneitymentioning

confidence: 93%

Effects of Austerity: Expenditure- and Tax-based Approaches

Alesina

Favero

Giavazzi

2019

Journal of Economic Perspectives

120

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“…Using the estimated model of the Italian dynamic General Equilibrium Model, for the period 1992-2012, Acocella et al (2020) assess that plans of fiscal consolidation aimed at reducing the public debt level based on tax increases rather than expenditure reductions are more effective.…”

Section: B Comparison Between Tax Cuts and Cash Transfersmentioning

confidence: 99%

Fiscal Stimulus in the European Union to Stabilize the COVID Shock

Menguy¹

2022

Journal of Economic Integration

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We document fiscal policies adopted in 2020 in five major European Union (EU) countries to deal with the COVID-19 pandemic. Then, we show the correlations between fiscal indicators and GDP growth. Economic stabilization was easier in countries where the budget deficit and the public debt were relatively small, with more room for maneuvers to conduct a counter-cyclical fiscal policy. Besides, the increase in public expenditure (cash transfers) did not always correlate with economic growth, whereas preserving government revenue was important in the case of tax cuts. More precisely, regarding the fiscal revenues of the EU member countries in 2020, reducing the weight on corporate income taxation, to sustain production supply and wealth creation by firms, was correlated with higher economic growth. Stylized facts show that the recession was weaker in countries where the relative weight of indirect taxation on household consumption increased, as in the Nordic countries.

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“…Following Giavazzi and Pagano, many studies such as Alesina and Perotti (1995, 1996), Ardagna (2004), Gupta et al (2004), Dincer and Ozdemir (2009), Alesina and Ardagna (2013), De Cos and Moral-Benito (2013), Leibrecht and Scharler (2013), Afonso and Jalles (2014), Afonso and Martins (2016), Alesina et al (2018), Bazgan (2019), Acocella et al (2020), Fernandez-Albertos and Kuo (2020), Giesenow et al (2020), and Herwartz and Theilen (2020) have investigated different dimensions of the FAs, including success, magnitude, and consistency. As a consequence, consensus has been developed in a circle of researchers about the optimal composition of the FAs.…”

Section: Review Of Literaturementioning

confidence: 99%

A Dynamic Analysis of the Impact of Fiscal Adjustment on Economic Growth: Evidence From Pakistan

Hussain

Ali

et al. 2021

Sage Open

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This study claims to be the first in assessing the short-run and long-run impacts of both the size and composition of fiscal adjustment on the growth in Pakistan. Empirical calibration has been made on Mankiw et al.’s model, while the Autoregressive Distributed Lag (ARDL) techniques of Pesaran et al. have been employed to carry out the estimation. To cure the problem of degenerate cases, the ARDL techniques have been augmented with the model of Sam et al. The analysis supports the hypothesis of “expansionary fiscal contraction” in the long run. The analysis reveals that the spending-based adjustment enhances the economic growth, whereas the tax-based adjustment would reduce the growth in the long run in the case of Pakistan. The Granger causality test indicates that the fiscal adjustments have been weakly exogenous, thereby allowing feedback effect from the economic growth toward the fiscal adjustment. Thus, the objective of sustained economic growth can be achieved through the spending-based consolidation measures.

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An evaluation of alternative fiscal adjustment plans: The case of Italy

Cited by 9 publications

References 30 publications

Effects of Austerity: Expenditure- and Tax-based Approaches

Effects of Austerity: Expenditure- and Tax-based Approaches

Fiscal Stimulus in the European Union to Stabilize the COVID Shock

A Dynamic Analysis of the Impact of Fiscal Adjustment on Economic Growth: Evidence From Pakistan

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