Roel Beetsma, Oana Furtuna, Massimo Giuliodori, 05 September 2017

Research has shown that planned fiscal consolidations have been less recessionary when carried out through public spending cuts rather than through increases in government revenues. This column argues that this may be at least partly due to differences in follow-up for the two consolidation strategies. Better follow-up of announced spending contractions may result in negative Keynesian responses similar to those that follow announced revenue increases, and so they may not necessarily provide a 'cheaper' route to budgetary consolidation than revenue increases.

Ansgar Rannenberg, Christian Schoder, Jan Strasky, 11 November 2015

From 2011 to 2013, fiscal policy in the Eurozone turned progressively more restrictive. This column argues that output cost of fiscal consolidation strongly depends on presence and strength of credit constraints. With credit constraints both in the household and the firm sector, fiscal consolidation would be largely responsible for the weak growth performance during 2011-2013. Postponing the fiscal consolidation to a period of unconstrained monetary policy would have avoided most of these losses.

Alberto Alesina, Francesco Giavazzi, 03 April 2012

Europe’s embrace of austerity has sparked a debate among economists. This column argues that the debate has gone astray. Until the critical principle – ‘how’ is as important as ‘how much’ – is embraced, the austerity debate in Europe will continue to be completely out of line with the real economic trade-offs.

Roberto Perotti, 14 November 2011

With crisis plaguing the Eurozone and austerity the favoured prescription for diseased EZ economies, some are asking: Can big fiscal consolidations, especially those based on cuts, actually restart growth? CEPR DP8658 examines four episodes of past fiscal consolidations in European countries and evaluates the evidence.

Alberto Alesina, Roberto Perotti, 17 June 2010

Many analysts blame Germany’s fiscal prudence for worsening the crisis. This essay argues that the monomaniacal focus on aggregate demand is based on slightly outdated and oversimplified Keynesianism. The real constraint on European growth is not Germany’s fiscal policy. It is the supply side rigidities that plague all European nations – especially those at the heart of this crisis. The demand side matters, but is it foolish to think that German budget deficit of 5% instead of 3% of GDP would solve Europe’s problems.