Fiscal consolidation and reforms: Substitutes, not complements
Coen Teulings 13 September 2012
Many OECD countries suffer from high sovereign debts. Sooner or later, this problem must be addressed. Many argue that this will require some form of fiscal retrenchment or institutional reform or a combination of the two. This column argues that the two are not complements as many suggest – they are instead substitutes.
Many OECD countries suffer from high sovereign debts. Sooner or later, this problem must be addressed. That will require some form of fiscal retrenchment.
Quite often the fiscal problems are due to market rigidities, barriers to entry, and distortive tax systems. A programme of reform must therefore include both fiscal consolidation and institutional reform to enhance future growth. Growth and the larger tax base that goes with it provides the best prospect for solving the fiscal problems.
Macroeconomic policy Taxation
Institutional reform, fiscal crises, Fiscal retrenchment, austerity
Fiscal adjustments and the recession
Alberto Alesina 12 November 2010
Many nations are in the middle of painful fiscal retrenchments. This column presents recent research on the impacts of these policies. It argues that spending cuts are less recessionary than tax increases when deficits are reduced and responds to criticisms of these findings in the recent IMF World Economic Outlook.
Many European countries are engaged in large fiscal adjustments. The standard Keynesian view is that these adjustments will cause deep recessions especially if they occur on the spending side (see for example Krugman 2010). A lively literature initiated by a paper by Giavazzi and Pagano (1990) has uncovered “non-Keynesian” effects of large fiscal adjustments. The latest instalment of this line of research is a paper that I co-authored with Silvia Ardagna (Alesina and Ardagna 2010).
Fiscal crisis, budget cuts, Fiscal retrenchment