European Parliament Library

Budget Consolidation :, Short-Term Pain and Long-Term Gain, Douglas Laxton, Susanna Mursula, Kevin Clinton, Michael Kumhof

The paper evaluates the costs and benefits of fiscal consolidation using simulations based on the IMFs global DSGE model GIMF. Over the longer run, well-targeted permanent reductions in budget deficits lead to a considerable increase in both the growth rate and the level of output. The gains may be enhanced by shifting some of the tax burden from incomes to consumption. In the short run, credibility plays a crucial role in determining the size of initial output loses. Global current account imbalances would be significantly reduced if budget consolidation was larger in countries with current account deficits
Table Of Contents
Cover Page; Title Page; Copyright Page; Contents; I. Introduction; II. The Model; A. Overview; B. Households; B.1 Overlapping-Generations Households; B.2 Liquidity-Constrained Households and Aggregate Households; C. Firms; D. Financial Sector; E. Government; E.1 Budget Constraint; E.2 Fiscal Policy; E.3 Monetary Policy; F. Calibration; III. Fiscal Consolidation, Growth and External Imbalances; A. Scenarios; 1. Scenarios: Tax Rates; B. Growth: Global Effects; 2. Global Effects; C. Growth: Short-Run Costs and Credibility; 3. Short-Run Costs and Credibility
Literary Form
non fiction
"July 2010."
Physical Description
1 online resource (49 p.)
Specific Material Designation
Form Of Item

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