OECD Economics Department Working Papers
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.
- Forthcoming titles
- ISSN: 18151973 (online)
- https://doi.org/10.1787/18151973
What Promotes Fiscal Consolidation
OECD Country Experiences
Fiscal consolidation is required in most OECD countries. This is especially so in view of mediumand
long-term spending pressures on public finances, related, inter alia, to ageing. Based on a dataset
covering a large number of OECD fiscal consolidation episodes starting in the late 1970s, the paper
presents evidence, both descriptive and econometric, on macroeconomic conditions and policy set-ups that
have been effective in triggering and sustaining fiscal consolidation. Main findings include: Large initial
deficits and high interest rates have been important in prompting fiscal adjustment and also in boosting the
overall size and duration of consolidation. Concerning the quality of fiscal policies, an emphasis on cutting
current expenditures has been associated with overall larger consolidation. Fiscal rules with embedded
expenditure targets tended to be associated with larger and longer adjustments, pointing to institutional
features playing a potentially important role in generating successful consolation efforts. Experience across
countries also shows that certain design features such as transparency, flexibility to face shocks and
effective enforcement mechanisms seem important for the effectiveness of fiscal rules.
Keywords: fiscal rules, deficit, fiscal consolidation, government revenue, government spending, public debt
JEL:
H11: Public Economics / Structure and Scope of Government / Structure, Scope, and Performance of Government;
H63: Public Economics / National Budget, Deficit, and Debt / Debt; Debt Management; Sovereign Debt;
H62: Public Economics / National Budget, Deficit, and Debt / Deficit; Surplus
- Click to access:
-
Click to download PDF - 894.50KBPDF
-
Click to Read online and shareREAD