Evidence on Fiscal Consolidations and the Evolution of Public Debt in Europe
26 Pages Posted: 27 Feb 2012 Last revised: 21 Mar 2012
Date Written: February 15, 2012
The objective of this paper is to gain insights into the relationship between deficit-reducing policies and the evolution of the debt/GDP ratio. We consider past events of fiscal consolidation in a selected group of EU countries, by using the new data set recently made available by Devries et al. (2011), and check what is the associated change of the debt/GDP ratio both from a short and medium-term perspective. Our results show that a favourable short-term response emerges in the majority of the countries considered, while the medium-term one is adverse for all. The analysis provides information to assess the convenience of deficit-reducing policies to contain or invert the evolution of the debt/GDP ratio.
Keywords: fiscal consolidation, debt/GDP ratio, European Union
JEL Classification: H63, E63
Suggested Citation: Suggested Citation