Fiscal Consolidations: Quality, Economic Conditions, and Success

In: Public choice, Band 109, Heft 3-4, S. 327-346

Abstract

Recent research has demonstrated the importance of good quality of fiscal adjustments for the success of government budget consolidations. We extend this approach to analyze the importance of the economic conditions in which fiscal consolidations are started for their success. The cyclical positions of the domestic & international economy, the initial debt level, & the stance of fiscal policy in the OECD are all important determinants of the likelihood of fiscal consolidations. They also affect the government's choice of consolidation strategy, making them important determinants of the success of fiscal consolidations. In contrast, the monetary policy stance plays only a negligible role for fiscal consolidations. The authors use the analysis to test for any Maastricht effects on the performance of European governments during the 1990s. Such effects are weak at best & occurred only during the first half of the decade. 9 Tables, 13 References. Adapted from the source document.