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Fiscal consolidation in developed and emerging economies [Fiscal consolidation in developed and emerging economies]

Author

Listed:
  • Paulo André Camuri

    (UFMG)

  • Frederico G. Jayme Jr.

    (UFMG)

  • Ana Maria Hermeto

    (UFMG)

Abstract

The debate regarding fiscal policy has given support to the formulation of an economic policy based on control of indebtedness and in persecution of public savings, acting as important support for the economic growth. This paper presents evidence that counter acts this theory of expansionary austerity. A set of panel data regressions is estimated - through Driscoll & Kraay’s, FGLS, panel corrected standard errors, and SUR estimators and the causality test approach proposed by Kónya (2006) - in search of robust inference related to the main determinants that encompasses the fiscal framework. Our conclusion is that the empirical evidence - using a set of 20 developed economies and other of 24 emerging economies - suggests that identical economic policies for different countries might conduce to results that are opposite to the desired outcome. Notwithstanding the adverse effects associated to explosive debt path, the search for “fiscal space” should be determined essentially by a pro-growth agenda. This is particularly important for the emerging economies facing the transition path challenges.

Suggested Citation

  • Paulo André Camuri & Frederico G. Jayme Jr. & Ana Maria Hermeto, 2015. "Fiscal consolidation in developed and emerging economies [Fiscal consolidation in developed and emerging economies]," Nova Economia, Economics Department, Universidade Federal de Minas Gerais (Brazil), vol. 25(spe), pages 835-861, December.
    • Handle: RePEc:nov:artigo:v:25:y:2015:i:spe:p:835-861
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    More about this item

    Keywords

    fiscal austerity; economic growth; correlation; Granger causality; panel time-series; seemingly unrelated regression (SUR);
    All these keywords.

    JEL classification:

    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt

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