Fiscal Consolidations (Favero & Giavazzi)

Output effects of fiscal consolidations by Carlo Favero and Francesco Giavazzi (09/2012), published by VOXEU. “The austerity debate hangs on the question of how fiscal policy affects economic output – but answering that question is no easy task. This column presents a paper that, it argues, overcomes some of the problems with identifying cause and effect…The main innovation of our paper is the analysis of fiscal plans – a combination of tax increases and spending cuts, some unanticipated, other anticipated, all announced at the typically done.”