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The impact of austerity policies in the Eurozone: fiscal multipliers and 'adjustment fatigue'

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  • Javier Bilbao-Ubillos
  • Ana-Isabel Fern�ndez-Sainz

Abstract

This article seeks to compare the significance of the links between fiscal policies and economic growth in the Eurozone before and after the imposition of adjustments on the countries bailed out, in an effort to estimate the scale of fiscal multipliers and to evaluate pro-cyclical or counter-cyclical orientation of the measures. The results of the regression serve to bear out the theoretical forecasts of those authors who warned of high fiscal multipliers in a context of recession, also characterized by a credit crunch, massive deleveraging in the private sector and near-zero interest rates.

Suggested Citation

  • Javier Bilbao-Ubillos & Ana-Isabel Fern�ndez-Sainz, 2014. "The impact of austerity policies in the Eurozone: fiscal multipliers and 'adjustment fatigue'," Applied Economics Letters, Taylor & Francis Journals, vol. 21(14), pages 955-959, September.
    • Handle: RePEc:taf:apeclt:v:21:y:2014:i:14:p:955-959
    DOI: 10.1080/13504851.2014.902013
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    References listed on IDEAS

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    1. Alan J. Auerbach & Yuriy Gorodnichenko, 2012. "Measuring the Output Responses to Fiscal Policy," American Economic Journal: Economic Policy, American Economic Association, vol. 4(2), pages 1-27, May.
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    3. Barro, Robert J, 1981. "Output Effects of Government Purchases," Journal of Political Economy, University of Chicago Press, vol. 89(6), pages 1086-1121, December.
    4. Lawrence Christiano & Martin Eichenbaum & Sergio Rebelo, 2011. "When Is the Government Spending Multiplier Large?," Journal of Political Economy, University of Chicago Press, vol. 119(1), pages 78-121.
    5. Ramey, Valerie A. & Shapiro, Matthew D., 1998. "Costly capital reallocation and the effects of government spending," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 48(1), pages 145-194, June.
    6. Burnside, Craig & Eichenbaum, Martin & Fisher, Jonas D. M., 2004. "Fiscal shocks and their consequences," Journal of Economic Theory, Elsevier, vol. 115(1), pages 89-117, March.
    7. Baxter, Marianne & King, Robert G, 1993. "Fiscal Policy in General Equilibrium," American Economic Review, American Economic Association, vol. 83(3), pages 315-334, June.
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    Cited by:

    1. Kurt Kratena & Gerhard Streicher, 2017. "Fiscal Policy Multipliers and Spillovers in a Multi-Regional Macroeconomic Input-Output Model," WIFO Working Papers 540, WIFO.
    2. Kleis, Mischa & Moessinger, Marc-Daniel, 2016. "The long-run effect of fiscal consolidation on economic growth: Evidence from quantitative case studies," ZEW Discussion Papers 16-047, ZEW - Leibniz Centre for European Economic Research, revised 2016.
    3. Curatola, Giuliano & Donadelli, Michael & Gioffré, Alessandro & Grüning, Patrick, 2015. "Austerity, fiscal uncertainty, and economic growth: Insights from fiscally weak EU countries," SAFE Working Paper Series 56, Leibniz Institute for Financial Research SAFE, revised 2015.
    4. Bilbao-Ubillos, Javier, 2023. "Lessons learned from poor governance: A comparison of the EU strategies for exiting the crises of 2008 and 2020," Structural Change and Economic Dynamics, Elsevier, vol. 67(C), pages 372-379.

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