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Fiscal consolidation strategy
| Content Provider | Semantic Scholar |
|---|---|
| Author | Taylor, John Bernard Wolters, Maik |
| Copyright Year | 2012 |
| Abstract | In the aftermath of the global financial crisis and great recession, many countries face substantial deficits and growing debts. In the United States, federal government outlays as a ratio to GDP rose substantially from about 19.5 percent before the crisis to over 24 percent after the crisis. In this paper we consider a fiscal consolidation strategy that brings the budget to balance by gradually reducing this spending ratio over time to the level that prevailed prior to the crisis. A crucial issue is the impact of such a consolidation strategy on the economy. We use structural macroeconomic models to estimate this impact focussing primarily on a dynamic stochastic general equilibrium model with price and wage rigidities and adjustment costs. We separate out the impact of reductions in government purchases and transfers, and we allow for a reduction in both distortionary taxes and government debt relative to the baseline of no consolidation. According to the model simulations GDP rises in the short run upon announcement and implementation of this fiscal consolidation strategy and remains higher than the baseline in the long run. We explore the role of the mix of expenditure cuts and tax reductions as well as gradualism in achieving this policy outcome. Finally, we conduct sensitivity studies regarding the type of model used and its parameterization. * John F. Cogan is the Leonard and Shirley Ely Senior Fellow at the Hoover Institution and a professor in the Public Policy Program at Stanford University. John B. Taylor is the George P. Shultz Senior Fellow in Economics at the Hoover Institution and Mary and Robert Raymond Professor of Economics at Stanford University. Volker Wieland is Professor of Monetary Economics at the Institute for Monetary and Financial Stability (IMFS) at Goethe University of Frankfurt. Maik Wolters is a Post-Doctoral Researcher at the IMFS. Helpful comments by two anonymous referees, the editors Robert Kollmann, Eric Leeper, Chris Otrok and Werner Roeger and by participants of the Fiscal Policy in the Aftermath of the Financial Crisis Conference at the European Commission in Brussels, March 2-3, 2012 including Günter Coenen, Jan in ’t Veld, Roland Straub and Harald Uhlig are gratefully acknowledged. All remaining errors are the authors’ sole responsibility. |
| File Format | PDF HTM / HTML |
| Alternate Webpage(s) | https://web.stanford.edu/~johntayl/CoganTaylorWielandWolters_120921.pdf |
| Alternate Webpage(s) | http://web.stanford.edu/~johntayl/Onlinepaperscombinedbyyear/2013/Fiscal_Consolidation_Strategy-JournalofEconomicDynamicsControl2013.pdf |
| Alternate Webpage(s) | http://publikationen.ub.uni-frankfurt.de/opus4/frontdoor/deliver/index/docId/27251/file/12_12.pdf |
| Alternate Webpage(s) | http://www.stanford.edu/~johntayl/CoganTaylorWielandWolters_120921.pdf |
| Alternate Webpage(s) | https://www.econstor.eu/bitstream/10419/97717/1/IMFS_WP_61.pdf |
| Language | English |
| Access Restriction | Open |
| Subject Keyword | BaseLine dental cement Baseline (configuration management) Complement System Proteins Distortion (economics) Economic Growth Ephrin Type-B Receptor 1, human Euro currency Federal Government Fiscal Policy Guanosine Diphosphate Half-Life 2: Episode One Harald Ganzinger Incised wound Inductive reasoning Institutional Tax Kind of quantity - Equilibrium Large Lung consolidation Mandibular right second molar tooth Manufactured Supplies Money Name binding Organisation for Economic Co-Operation and Development Phase II/III Trial Phytophthora hedraiandra Public-Private Sector Partnerships Purchasing Semiconductor consolidation Simulation Smoothing Statutes and Laws Taxes eric payment |
| Content Type | Text |
| Resource Type | Article |
