When is austerity ineffective?
"This paper offers a formal analysis of the relationship between changes in government primary balance and debt-to-GDP ratio. it establishes the conditions under which a fiscal consolidation increases - instead of decreasing - the stock of government liabilities relative to aggregate output. A...
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| Institution: | ETUI-European Trade Union Institute |
| Format: | TEXT |
| Language: | English |
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Università di Bologna
2013
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| Subjects: | |
| Online Access: | https://www.labourline.org/KENTIKA-19127264124919454469-When-is-austerity-ineffective?.htm |
| Summary: | "This paper offers a formal analysis of the relationship between changes in government primary balance and debt-to-GDP ratio. it establishes the conditions under which a fiscal consolidation increases - instead of decreasing - the stock of government liabilities relative to aggregate output. A crucial role is played by the relationship between the elasticities of average cost of debt and nominal output to primary balance: while the former depends on debt maturity and risk premia dynamics, the latter relates to the well-known controversy on the size of government spending multipliers. The paper shows an application to the ongoing fiscal consolidation process in the Eurozone." |
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| Physical Description: | 10 p. Digital |