IDEAS home Printed from https://ideas.repec.org/a/bla/obuest/v87y2025i2p330-356.html
   My bibliography  Save this article

Long‐run Effects of Austerity: An Analysis of Size Dependence and Persistence in Fiscal Multipliers

Author

Listed:
  • Guilherme Klein Martins

Abstract

This paper provides evidence that austerity shocks have long‐run negative effects on GDP. Our baseline results show that contractionary fiscal shocks larger than 3% of GDP generate a negative effect of more than 5.5% on GDP even after 15 years. Evidence is also found linking austerity to smaller capital stock and total hours worked in the long‐run. The results are robust to different fiscal shock datasets, the exclusion of particular shocks, and the use of cleaner controls. The paper also engages with the emerging discussion regarding fiscal multipliers heterogeneity, presenting evidence that the effects of exogenous fiscal measures are nonlinear on the shock size. The results also contribute to the broader discussion on the long‐run effects of demand by suggesting that such shocks might permanently affect the economy.

Suggested Citation

  • Guilherme Klein Martins, 2025. "Long‐run Effects of Austerity: An Analysis of Size Dependence and Persistence in Fiscal Multipliers," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 87(2), pages 330-356, April.
    • Handle: RePEc:bla:obuest:v:87:y:2025:i:2:p:330-356
    DOI: 10.1111/obes.12646
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/obes.12646
    Download Restriction: no
    File URL: https://libkey.io/10.1111/obes.12646?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:obuest:v:87:y:2025:i:2:p:330-356. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/sfeixuk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.