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The Impact of Austerity Measures on Government Borrowing in GIIPS

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  • Imre Ersoy
  • Talha Yanmaz

Abstract

The article investigates the effects of austerity measures on government debt in Greece, Ireland, Italy, Portugal and Spain (GIIPS) by employing panel cointegration test and using data between 1998 and 2014. The result of empirical analysis shows that tax rate increase on personal income did not result with decrease in government debt. Interest rate and wage that are control variables are also positively related with government debt levels. The result of this empirical analysis suggests that the impact of austerity measures on government borrowing in GIIPS is positive, despite the expectations of certain economic agents.

Suggested Citation

  • Imre Ersoy & Talha Yanmaz, 2016. "The Impact of Austerity Measures on Government Borrowing in GIIPS," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 8(12), pages 106-112, December.
    • Handle: RePEc:ibn:ijefaa:v:8:y:2016:i:12:p:106-112
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    References listed on IDEAS

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    3. Pedroni, Peter, 2004. "Panel Cointegration: Asymptotic And Finite Sample Properties Of Pooled Time Series Tests With An Application To The Ppp Hypothesis," Econometric Theory, Cambridge University Press, vol. 20(3), pages 597-625, June.
    4. Òscar Jordà & Alan M. Taylor, 2016. "The Time for Austerity: Estimating the Average Treatment Effect of Fiscal Policy," Economic Journal, Royal Economic Society, vol. 126(590), pages 219-255, February.
    5. Castro, Gabriela & Félix, Ricardo M. & Júlio, Paulo & Maria, José R., 2015. "Unpleasant debt dynamics: Can fiscal consolidations raise debt ratios?," Journal of Macroeconomics, Elsevier, vol. 44(C), pages 276-294.
    6. Jocelyn Boussard & Francisco de Castro & Matteo Salto, 2012. "Fiscal Multipliers and Public Debt Dynamics in Consolidations," European Economy - Economic Papers 2008 - 2015 460, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
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    8. Mr. Luc Eyraud & Miss Anke Weber, 2013. "The Challenge of Debt Reduction during Fiscal Consolidation," IMF Working Papers 2013/067, International Monetary Fund.
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    Cited by:

    1. Bardaka, Ioanna & Bournakis, Ioannis & Kaplanoglou, Georgia, 2021. "Total factor productivity (TFP) and fiscal consolidation: How harmful is austerity?," Economic Modelling, Elsevier, vol. 94(C), pages 908-922.
    2. Alfredo Arahuetes García & Gonzalo Gómez Bengoechea, 2022. "Back to the Future: Lessons from the 2009–2012 austerity policies for the aftermath of the COVID crisis," Global Policy, London School of Economics and Political Science, vol. 13(5), pages 751-766, November.

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    More about this item

    Keywords

    austerity measures; tax rate; government debt; GIIPS countries; panel cointegration analysis;
    All these keywords.

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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