Τhe effects of fiscal consolidation in OECD countries

Georgantas, Georgios; Kasselaki, Maria; Tagkalakis, Athanasios

doi:10.1016/j.econmod.2022.106099

Cited by 13 publications

(3 citation statements)

References 46 publications

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“…Fan et al (2023) examine trends in debt because of the onset of three types of calamities, namely natural disasters, armed conflicts, and external debt distress in countries and show that debt and growth evolve quite differently depending on the type of calamity. Georgantas et al (2023) maintain that fiscal and spending adjustments implemented in recessions, in periods with tight monetary conditions and when the debt ratio is above 80% are self-defeating, whereas fiscal consolidations that are initiated in expansions, in low debt countries, and with monetary conditions that are loose in open economies can lead to a more pronounced decline in the debt ratio.…”

Section: Scientific Explanation Of Resultsmentioning

confidence: 94%

Negative Effects of High Public Debt for Health Planning: Lessons From Covid-19 Pandemic Crisis in Europe

Coccia,

Benati

2023

Preprint

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The goal of this study is to analyze why some countries have had a high negative impact of COVID-19 pandemic crisis in terms of fatality rate compared to others. In particular, this study endeavors to verify whether statistical evidence supports the hypothesis that high general government gross debt in countries generates a structural vulnerability in socioeconomic and health systems to face emergencies, such as COVID-19 pandemic crisis. The research setting here analyzes the relationship between general government gross debt (as % GDP), healthcare expenditures per capita, and COVID-19 case fatality in an international context given by European countries. Empirical evidence reveals that European countries having lower COVID-19 fatality rate in 2020 (1.40%, indicated as group 1) had also lower government gross debt as % of GDP both in 2009 (50.79%) and 2019 (46.80%) than countries with higher fatality rate (2.83% given by group 2) that had 81.49% in 2009 and 67.22% in 2019. In addition, group 1 has from 2009 to 2019 a lower growth of government gross debt (% of GDP) given by 0.12 compared to group 2, which experienced a high growth of 0.29 generating a high burden for socioeconomic system and public finance. This structural situation leads countries of group 1 with lower COVID-19 fatality rates to support higher levels of health expenditure per capita (values higher than $3,100 per capita), whereas countries with a higher COVID-19 fatality rate have health expenditure per capita lower than previous group 1 (about $2,530 in 2009 and $2,600 in 2019) also for stringent austerity policies imposed by European Union. Estimated relationship shows that countries with 1% increase in the change of health expenditure per capita over 2009-2019 (predicted values considering in stage 1 the explanatory variable of government gross debt as % of GDP in 2009), it reduces the level of COVID-19 fatality rate by 2.63%. The contribution here expands the knowledge in these research topics by endeavoring to clarify primary causes of vulnerability of countries in crisis management driven by high levels of government gross debt, which deteriorate socioeconomic systems with stringent austerity policies that create constraints to increase health expenditures and improve health planning, reducing preparedness and resilience of countries to face crises similar to COVID-19 pandemic.

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Section: Scientific Explanation Of Resultsmentioning

confidence: 94%

Negative Effects of High Public Debt for Health Planning: Lessons From Covid-19 Pandemic Crisis in Europe

Coccia,

Benati

2023

Preprint

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“…In this context, Fan et al [73] reported a rapid increase in public debt across economies during 2020–2021, primarily because of the global COVID-19 pandemic crisis. Georgantas et al [74] maintained that fiscal and spending adjustments made during recessions, especially in periods of tight monetary conditions and when the debt ratio exceeds 80%, tend to be counterproductive. In contrast, fiscal consolidation efforts initiated during economic expansions, particularly in low-debt countries, and with accommodating monetary conditions of open economies, can result in a more substantial reduction in the debt ratio.…”

Section: Discussionmentioning

confidence: 99%

Negative effects of high public debt on health systems facing pandemic crisis: Lessons from COVID-19 in Europe to prepare for future emergencies

Coccia,

Benati

2024

AIMSPH

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<abstract> <p>The investigation goal here was to analyze how the level of public debt affects preparedness of health systems to face emergencies. In particular, this study examined the negative effects of high public debt on health systems of European countries in the presence of the COVID-19 pandemic crisis. Empirical evidence revealed that European countries with a lower level of government debt as a percentage of GDP both in 2009 and 2019 (the period before the arrival of the pandemic) had lower COVID-19 fatality rates compared to countries with higher levels of public debt. The explanation is that high levels of public debt in countries trigger budget constraints that limit their ability to allocate resources to healthcare systems (e.g., health expenditures and investments), weakening health system performance and causing systemic vulnerability and lower preparedness during emergencies, such as with the COVID-19 pandemic. Implications of health policies are suggested to improve strategies of crisis management.</p> </abstract>

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“…Using the time-varying parameter vector autoregression (TVP-VAR) it was found that CAPB with time-varying parameters better captures the fiscal consolidation that constant elasticity of the CAPB It was found that the shock of macroeconomic uncertainty harms economic growth. Georgantas et al (2023) highlight the importance of timing for fiscal policy adjustments. The authors argue that adjustments based on spending that are made during recessions, times of tight money, or when the debt-to-income ratio is higher than 80% are counterproductive.…”

Section: Threshold Of Fiscal Consolidationmentioning

confidence: 99%

Threshold of the CAPB That Can Be Attributed to Fiscal Consolidation Episodes in South Africa

Buthelezi

Nyatanga

2023

Economies

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This paper investigates the threshold of the cyclical adjusted primary balance (CAPB) that can be attributed to fiscal consolidation in South Africa. The CAPB framework is used in the threshold autoregressive regime (TAR) from 1979 to 2022. The contribution of the paper is the estimation of the CAPB in the context of South Africa to find fiscal consolidation episodes. Moreover, we identify the threshold of CAPB that can be attributed to fiscal consolidation, which the available literature is silent on. The TAR, first-order derivative and dummy variables are employed to find thresholds that can be attributed to fiscal consolidation episodes. By doing so, we provide valuable insights into the underlying dynamics of fiscal consolidation in the country, which can help policymakers develop more effective strategies for managing fiscal consolidation episodes. We estimated the success of fiscal consolidation on government debt in South Africa. There is a threshold of −1.28168%, 1.9182%, and 1.9270% for the CAPB of total government revenue increase, government expenditure cut, and the CAPB as a sum of both revenue and expenditure, respectively. These thresholds are different from the threshold of 1.5% advocated in the literature. It is recommended that a country-based threshold be used to find fiscal consolidation episodes. No or less fiscal consolidation is needed, as it results in less chance of reduction in government debt. Fiscal authorities must establish and execute a strategy for managing domestic government debt to avoid increasing its risk.

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Τhe effects of fiscal consolidation in OECD countries

Cited by 13 publications

References 46 publications

Negative Effects of High Public Debt for Health Planning: Lessons From Covid-19 Pandemic Crisis in Europe

Negative Effects of High Public Debt for Health Planning: Lessons From Covid-19 Pandemic Crisis in Europe

Negative effects of high public debt on health systems facing pandemic crisis: Lessons from COVID-19 in Europe to prepare for future emergencies

Threshold of the CAPB That Can Be Attributed to Fiscal Consolidation Episodes in South Africa

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