- ISSN :
- 1815-1973 (online)
- DOI :
Working papers from the Economics Department of the OECD that cover the full range of the Department’s work including the economic situation, policy analysis and projections; fiscal policy, public expenditure and taxation; and structural issues including ageing, growth and productivity, migration, environment, human capital, housing, trade and investment, labour markets, regulatory reform, competition, health, and other issues.
The views expressed in these papers are those of the author(s) and do not necessarily reflect those of the OECD or of the governments of its member countries.
Non-Keynesian Effects of Fiscal Consolidation
An Analysis with an Estimated DSGE Model for the Hungarian EconomyClick to Access:
- Szilárd Benk1, Zoltán M. Jakab1
- Author Affiliations
- 1: OECD, France
- 09 Mar 2012
- Bibliographic information
Using an estimated DSGE model for Hungary, the paper identifies the possible non-Keynesian channels through which a fiscal consolidation may manifest as expansionary. Simulations show that fiscal consolidation policies are typically contractionary. Nevertheless, taking into account some specific features of the Hungarian economy, there is a possibility that expansionary effects arise. These effects may take the form of a drop in interest rate risk premium or favourable balance sheet effects through the appreciation of the currency. However, the credibility of fiscal consolidation is key in achieving positive output effects. A non-credible consolidation is unlikely to expand output, regardless of the assumptions regarding the specific features of the economy, and regardless of the composition of a consolidation package.
- non-Keynesian effects, taxation, fiscal consolidation, government expenditure, DSGE model
- JEL Classification:
- E27: Macroeconomics and Monetary Economics / Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy / Forecasting and Simulation: Models and Applications
- E62: Macroeconomics and Monetary Economics / Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook / Fiscal Policy
- H30: Public Economics / Fiscal Policies and Behavior of Economic Agents / General
- H50: Public Economics / National Government Expenditures and Related Policies / General