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Is government spending the key to successful consolidation?

Author

Listed:
  • M. Nautet

    (National Bank of Belgium)

  • R. Schoonackers

    (National Bank of Belgium)

  • P. Stinglhamber

    (National Bank of Belgium)

  • L. Van Meensel

    (National Bank of Belgium)

Abstract

The financial crisis that erupted during 2007 and intensified in 2008 and the ensuing economic recession led to a serious deterioration in the public finances of most advanced economies. That resulted in a sharp increase in the fiscal deficit and public debt in those countries, including Belgium. Since then, almost all countries have made considerable efforts to achieve fiscal consolidation in order to end the unsustainable developments. However, restoring sustainable public finances will entail additional efforts in most countries in the years ahead. This article examines the budgetary instruments that can be used to continue consolidating public finances. In the process, it examines in depth the role of public spending. It describes the impact of the various budgetary instruments on economic activity in both the short and long term. Special attention is given to the fiscal position and potential consolidation instruments in Belgium.

Suggested Citation

  • M. Nautet & R. Schoonackers & P. Stinglhamber & L. Van Meensel, 2014. "Is government spending the key to successful consolidation?," Economic Review, National Bank of Belgium, issue i, pages 29-44, June.
    • Handle: RePEc:nbb:ecrart:y:2014:m:june:i:i:p:29-44
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    References listed on IDEAS

    as
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    3. Giavazzi, Francesco & Alesina, Alberto & Favero, Carlo A., 2012. "The output effect of fiscal consolidations," CEPR Discussion Papers 9105, C.E.P.R. Discussion Papers.
    4. M. Nautet & L. Van Meensel, 2011. "Economic impact of the public debt," Economic Review, National Bank of Belgium, issue ii, pages 7-19, September.
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    More about this item

    Keywords

    Fiscal consolidation; government expenditure; fiscal multipliers; fiscal policy;
    All these keywords.

    JEL classification:

    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents
    • H5 - Public Economics - - National Government Expenditures and Related Policies
    • H6 - Public Economics - - National Budget, Deficit, and Debt

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