Fiscal Adjustments: Determinants and Macroeconomic Consequences

An Analysis of the Convergence of the Composition of Public Expenditures in European Union Countries

“…In this approach, fiscal policy affects economic activity only in the short run but it cannot affect the potential output. The long‐term effects of fiscal policy arise from the non‐Keynesian effects of fiscal policy: fiscal consolidation has an expansionary impact on the economic activity both in the short and the long term (Alesina and Perotti ; Alesina, Perotti, and Tavares ; Giavazzi and Pagano ; Hjelm ; Kumar, Leigh, and Plekhanov ).…”

Convergence in public expenditures across EU countries: evidence from club convergence

“…At the same time, the European Monetary Union (EMU) and in terms of economic policy implementation, requires the member countries to implement an orthodox strategy of macroeconomic policy that downgrades fiscal policy. This strategy is based on a theoretical (neoclassical) background according to which fiscal policy cannot affect economic growth in the long-run and it can have real effects only in the short-run, correcting cyclical disequilibria (Alesina et al, 2002;Briotti, 2005;Kumar et al, 2007). Nevertheless, the Lisbon Strategy and the reformed Stability and Growth Pact accept the potential positive impact that fiscal policy can have on real economy even in the long-run, an impact that is attributed to the composition of public expenditures (Deroose and Kastrop, 2008).…”

Convergence in Public Expenditure Across a Sample of Emerging Countries: Evidence from Club Convergence

“…Canova (2004) hypothesis. Our approach here is with respect to public spending (public expenditure) and not with respect to income levels; however, there is close association between these two variables, especially within a Keynesian and neo-Keynesian perspective (Alesina et al 2002;Kumar et al 2007). Overall, the empirical findings are expected to identify strategies that would allow emerging countries to improve the management of public expenditure so as to raise the chances of meeting the income growth and social needs of their populations under tight budget constraints, while any absence of public-spending convergence could contribute to economic-growth divergence and may lead to social and political instability and, therefore, to higher stressing of political conflicts.…”