Fiscal consolidation strategy

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 thi...

Ausführliche Beschreibung

Gespeichert in:
Bibliographische Detailangaben
Veröffentlicht in:Journal of economic dynamics & control 2013-02, Vol.37 (2), p.404-421
Hauptverfasser: Cogan, John F., Taylor, John B., Wieland, Volker, Wolters, Maik H.
Format: Artikel
Sprache:eng
Schlagworte:
Online-Zugang:Volltext
Tags: Tag hinzufügen
Keine Tags, Fügen Sie den ersten Tag hinzu!
container_end_page 421
container_issue 2
container_start_page 404
container_title Journal of economic dynamics & control
container_volume 37
creator Cogan, John F.
Taylor, John B.
Wieland, Volker
Wolters, Maik H.
description 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.
doi_str_mv 10.1016/j.jedc.2012.10.004
format Article
fullrecord <record><control><sourceid>proquest_cross</sourceid><recordid>TN_cdi_proquest_miscellaneous_1282038800</recordid><sourceformat>XML</sourceformat><sourcesystem>PC</sourcesystem><els_id>S0165188912002023</els_id><sourcerecordid>1282038800</sourcerecordid><originalsourceid>FETCH-LOGICAL-c469t-dad679b6939e9ee322807110bbf5f403fcf5a3c8352bee9aed98aea66712ebea3</originalsourceid><addsrcrecordid>eNp9kE9LxDAUxIMouK5-AUFY8OKl9SXpnwS8yOKqsOBFzyFNXiWl26xJK-y3N2U9efD0YPjNMG8IuaaQU6DVfZd3aE3OgLIk5ADFCVlQUcuM1gU_JYsElRkVQp6Tixg7AChZSRfkZuOi0f3K-CH63lk9Oj-s4hj0iJ-HS3LW6j7i1e9dko_N0_v6Jdu-Pb-uH7eZKSo5ZlbbqpZNJblEicgZE1BTCk3Tlm0BvDVtqbkRvGQNotRopdCoq6qmDBvUfEnujrn74L8mjKPapVrY93pAP0VFmWDAhQBI6O0ftPNTGFK7RPEUCBJkotiRMsHHGLBV--B2OhwUBTUvpjo1L6bmxWYtLZZMD0cTple_HQYVjcPBoHUBzaisd__ZfwAVTXLH</addsrcrecordid><sourcetype>Aggregation Database</sourcetype><iscdi>true</iscdi><recordtype>article</recordtype><pqid>1237120909</pqid></control><display><type>article</type><title>Fiscal consolidation strategy</title><source>Access via ScienceDirect (Elsevier)</source><creator>Cogan, John F. ; Taylor, John B. ; Wieland, Volker ; Wolters, Maik H.</creator><creatorcontrib>Cogan, John F. ; Taylor, John B. ; Wieland, Volker ; Wolters, Maik H.</creatorcontrib><description>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.</description><identifier>ISSN: 0165-1889</identifier><identifier>EISSN: 1879-1743</identifier><identifier>DOI: 10.1016/j.jedc.2012.10.004</identifier><identifier>CODEN: JEDCDH</identifier><language>eng</language><publisher>Amsterdam: Elsevier B.V</publisher><subject>Budget deficit ; Consolidation ; Debt ; Deficit financing ; Distortionary taxes ; Economic crisis ; Economic dynamics ; Financial crisis ; Fiscal policy ; Fiscal reform ; GDP ; General economic equilibrium ; Gross Domestic Product ; Keynesianism ; Macroeconomics ; New-Keynesian models ; Recession ; Studies ; U.S.A</subject><ispartof>Journal of economic dynamics &amp; control, 2013-02, Vol.37 (2), p.404-421</ispartof><rights>2012 Elsevier B.V.</rights><rights>Copyright Elsevier Sequoia S.A. Feb 2013</rights><lds50>peer_reviewed</lds50><oa>free_for_read</oa><woscitedreferencessubscribed>false</woscitedreferencessubscribed><citedby>FETCH-LOGICAL-c469t-dad679b6939e9ee322807110bbf5f403fcf5a3c8352bee9aed98aea66712ebea3</citedby><cites>FETCH-LOGICAL-c469t-dad679b6939e9ee322807110bbf5f403fcf5a3c8352bee9aed98aea66712ebea3</cites></display><links><openurl>$$Topenurl_article</openurl><openurlfulltext>$$Topenurlfull_article</openurlfulltext><thumbnail>$$Tsyndetics_thumb_exl</thumbnail><linktohtml>$$Uhttps://dx.doi.org/10.1016/j.jedc.2012.10.004$$EHTML$$P50$$Gelsevier$$H</linktohtml><link.rule.ids>314,780,784,3550,27924,27925,45995</link.rule.ids></links><search><creatorcontrib>Cogan, John F.</creatorcontrib><creatorcontrib>Taylor, John B.</creatorcontrib><creatorcontrib>Wieland, Volker</creatorcontrib><creatorcontrib>Wolters, Maik H.</creatorcontrib><title>Fiscal consolidation strategy</title><title>Journal of economic dynamics &amp; control</title><description>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.</description><subject>Budget deficit</subject><subject>Consolidation</subject><subject>Debt</subject><subject>Deficit financing</subject><subject>Distortionary taxes</subject><subject>Economic crisis</subject><subject>Economic dynamics</subject><subject>Financial crisis</subject><subject>Fiscal policy</subject><subject>Fiscal reform</subject><subject>GDP</subject><subject>General economic equilibrium</subject><subject>Gross Domestic Product</subject><subject>Keynesianism</subject><subject>Macroeconomics</subject><subject>New-Keynesian models</subject><subject>Recession</subject><subject>Studies</subject><subject>U.S.A</subject><issn>0165-1889</issn><issn>1879-1743</issn><fulltext>true</fulltext><rsrctype>article</rsrctype><creationdate>2013</creationdate><recordtype>article</recordtype><recordid>eNp9kE9LxDAUxIMouK5-AUFY8OKl9SXpnwS8yOKqsOBFzyFNXiWl26xJK-y3N2U9efD0YPjNMG8IuaaQU6DVfZd3aE3OgLIk5ADFCVlQUcuM1gU_JYsElRkVQp6Tixg7AChZSRfkZuOi0f3K-CH63lk9Oj-s4hj0iJ-HS3LW6j7i1e9dko_N0_v6Jdu-Pb-uH7eZKSo5ZlbbqpZNJblEicgZE1BTCk3Tlm0BvDVtqbkRvGQNotRopdCoq6qmDBvUfEnujrn74L8mjKPapVrY93pAP0VFmWDAhQBI6O0ftPNTGFK7RPEUCBJkotiRMsHHGLBV--B2OhwUBTUvpjo1L6bmxWYtLZZMD0cTple_HQYVjcPBoHUBzaisd__ZfwAVTXLH</recordid><startdate>20130201</startdate><enddate>20130201</enddate><creator>Cogan, John F.</creator><creator>Taylor, John B.</creator><creator>Wieland, Volker</creator><creator>Wolters, Maik H.</creator><general>Elsevier B.V</general><general>Elsevier Sequoia S.A</general><scope>AAYXX</scope><scope>CITATION</scope><scope>8BJ</scope><scope>FQK</scope><scope>JBE</scope></search><sort><creationdate>20130201</creationdate><title>Fiscal consolidation strategy</title><author>Cogan, John F. ; Taylor, John B. ; Wieland, Volker ; Wolters, Maik H.</author></sort><facets><frbrtype>5</frbrtype><frbrgroupid>cdi_FETCH-LOGICAL-c469t-dad679b6939e9ee322807110bbf5f403fcf5a3c8352bee9aed98aea66712ebea3</frbrgroupid><rsrctype>articles</rsrctype><prefilter>articles</prefilter><language>eng</language><creationdate>2013</creationdate><topic>Budget deficit</topic><topic>Consolidation</topic><topic>Debt</topic><topic>Deficit financing</topic><topic>Distortionary taxes</topic><topic>Economic crisis</topic><topic>Economic dynamics</topic><topic>Financial crisis</topic><topic>Fiscal policy</topic><topic>Fiscal reform</topic><topic>GDP</topic><topic>General economic equilibrium</topic><topic>Gross Domestic Product</topic><topic>Keynesianism</topic><topic>Macroeconomics</topic><topic>New-Keynesian models</topic><topic>Recession</topic><topic>Studies</topic><topic>U.S.A</topic><toplevel>peer_reviewed</toplevel><toplevel>online_resources</toplevel><creatorcontrib>Cogan, John F.</creatorcontrib><creatorcontrib>Taylor, John B.</creatorcontrib><creatorcontrib>Wieland, Volker</creatorcontrib><creatorcontrib>Wolters, Maik H.</creatorcontrib><collection>CrossRef</collection><collection>International Bibliography of the Social Sciences (IBSS)</collection><collection>International Bibliography of the Social Sciences</collection><collection>International Bibliography of the Social Sciences</collection><jtitle>Journal of economic dynamics &amp; control</jtitle></facets><delivery><delcategory>Remote Search Resource</delcategory><fulltext>fulltext</fulltext></delivery><addata><au>Cogan, John F.</au><au>Taylor, John B.</au><au>Wieland, Volker</au><au>Wolters, Maik H.</au><format>journal</format><genre>article</genre><ristype>JOUR</ristype><atitle>Fiscal consolidation strategy</atitle><jtitle>Journal of economic dynamics &amp; control</jtitle><date>2013-02-01</date><risdate>2013</risdate><volume>37</volume><issue>2</issue><spage>404</spage><epage>421</epage><pages>404-421</pages><issn>0165-1889</issn><eissn>1879-1743</eissn><coden>JEDCDH</coden><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.</abstract><cop>Amsterdam</cop><pub>Elsevier B.V</pub><doi>10.1016/j.jedc.2012.10.004</doi><tpages>18</tpages><oa>free_for_read</oa></addata></record>
fulltext fulltext
identifier ISSN: 0165-1889
ispartof Journal of economic dynamics & control, 2013-02, Vol.37 (2), p.404-421
issn 0165-1889
1879-1743
language eng
recordid cdi_proquest_miscellaneous_1282038800
source Access via ScienceDirect (Elsevier)
subjects Budget deficit
Consolidation
Debt
Deficit financing
Distortionary taxes
Economic crisis
Economic dynamics
Financial crisis
Fiscal policy
Fiscal reform
GDP
General economic equilibrium
Gross Domestic Product
Keynesianism
Macroeconomics
New-Keynesian models
Recession
Studies
U.S.A
title Fiscal consolidation strategy
url https://sfx.bib-bvb.de/sfx_tum?ctx_ver=Z39.88-2004&ctx_enc=info:ofi/enc:UTF-8&ctx_tim=2024-12-25T17%3A58%3A26IST&url_ver=Z39.88-2004&url_ctx_fmt=infofi/fmt:kev:mtx:ctx&rfr_id=info:sid/primo.exlibrisgroup.com:primo3-Article-proquest_cross&rft_val_fmt=info:ofi/fmt:kev:mtx:journal&rft.genre=article&rft.atitle=Fiscal%20consolidation%20strategy&rft.jtitle=Journal%20of%20economic%20dynamics%20&%20control&rft.au=Cogan,%20John%20F.&rft.date=2013-02-01&rft.volume=37&rft.issue=2&rft.spage=404&rft.epage=421&rft.pages=404-421&rft.issn=0165-1889&rft.eissn=1879-1743&rft.coden=JEDCDH&rft_id=info:doi/10.1016/j.jedc.2012.10.004&rft_dat=%3Cproquest_cross%3E1282038800%3C/proquest_cross%3E%3Curl%3E%3C/url%3E&disable_directlink=true&sfx.directlink=off&sfx.report_link=0&rft_id=info:oai/&rft_pqid=1237120909&rft_id=info:pmid/&rft_els_id=S0165188912002023&rfr_iscdi=true