Discussion Paper Details

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Title: Revenue- versus spending-based fiscal consolidation announcements: follow-up, multipliers and confidence

Author(s): Roel Beetsma, Oana Furtuna, Massimo Giuliodori and Haroon Mumtaz

Publication Date: July 2017

Keyword(s): confidence, fiscal consolidation announcements, Fiscal multipliers, follow-up, narrative identification and panel vector auto-regression

Programme Area(s): International Macroeconomics and Finance and Monetary Economics and Fluctuations

Abstract: Based on a newly-constructed narrative dataset on fiscal consolidation announcements for thirteen EU countries over the period 1978-2013, a panel VAR analysis shows that revenue-based consolidation announcements affect economic activity more adversely than do spending-based announcements. The combination of larger actual follow-up and larger revenue multipliers helps to explain the difference. The unique nature of our dataset allows to control for fiscal anticipation and the confidence channel following the announcements. The confidence channel has an important role in explaining the difference in the multipliers following the two types of announcements.

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Bibliographic Reference

Beetsma, R, Furtuna, O, Giuliodori, M and Mumtaz, H. 2017. 'Revenue- versus spending-based fiscal consolidation announcements: follow-up, multipliers and confidence'. London, Centre for Economic Policy Research.