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Expansionary fiscal contractions?

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  • Vincent (Vincent Peter) Hogan

Abstract

We examine the usefulness of the Expansionary Fiscal Contraction hypothesis in explaining the performance of the Irish and Danish economies. We find some evidence in favour of a weak version of the EFC hypotheisis: If the budget deficit is reduced in response to a fiscal crisis, consumption does seem to increase. However this increase is not enough to offset the direct effect of a reduction in the deficit on output- fiscal contractions are not literally expansionary.

Suggested Citation

  • Vincent (Vincent Peter) Hogan, 2001. "Expansionary fiscal contractions?," Working Papers 200103, School of Economics, University College Dublin.
    • Handle: RePEc:ucn:wpaper:200103
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    File URL: http://hdl.handle.net/10197/925
    File Function: First version, 2001
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    References listed on IDEAS

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    3. Francesco Giavazzi & Marco Pagano, 1990. "Can Severe Fiscal Contractions Be Expansionary? Tales of Two Small European Countries," NBER Chapters, in: NBER Macroeconomics Annual 1990, Volume 5, pages 75-122, National Bureau of Economic Research, Inc.
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    5. Francesco Giavazzi & Marco Pagano, 1995. "Non-Keynesian Effects of Fiscal Policy Changes: International Evidence and the Swedish Experience," NBER Working Papers 5332, National Bureau of Economic Research, Inc.
    6. Alberto Alesina & Roberto Perotti, 1997. "Fiscal Adjustments in OECD Countries: Composition and Macroeconomic Effects," IMF Staff Papers, Palgrave Macmillan, vol. 44(2), pages 210-248, June.
    7. Olivier Jean Blanchard & Stanley Fischer (ed.), 1990. "NBER Macroeconomics Annual 1990," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262521555, April.
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