Past Fiscal Adjustments: Lessons from Failures and Successes

This paper analyzes large fiscal adjustment plans, defined on the basis of the envisaged reduction in the public debt or deficit, and it compares ex ante plans with ex post outcomes. The motivation for this novel approach is two-fold. First, useful lessons can be drawn not only from successes, but also from failures to meet policy objectives. Second, by taking into account whether observed outcomes stemmed from intended policies or unexpected developments, this paper sheds new light on some of the findings obtained by studies that had relied on a purely ex post approach. The evidence is based on in-depth individual country case studies for each of the G7 countries and on a systematic, cross-country statistical analysis of all fiscal adjustment plans presented by all European Union countries during the past two decades.