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Is fiscal fatigue a threat to consolidation programmes?

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journal contribution
posted on 17.05.2017 by Luca Agnello, Vitor Castro, Ricardo M. Sousa
Building on a narrative approach to identify episodes of fiscal consolidation, data for a group of seventeen industrial countries over the period 1978–2009, and continuous-time duration models, we find evidence suggesting that the likelihood of a fiscal consolidation ending increases over time, but only for programmes that last fewer than six years. Additionally, fiscal consolidations tend to last longer in non-European than in European countries. Our results emphasize that chronic fiscal imbalances might lead to a vicious austerity cycle, while discipline in the behaviour of fiscal authorities is a means of achieving credible and shorter adjustment measures. Therefore, fiscal fatigue is likely to compromise the implementation and successfulness of fiscal consolidation programmes.

Funding

Castro and Sousa acknowledge that this work has been financed by Operational Programme for Competitiveness Factors - COMPETE and by National Funds through the FCT - Portuguese Foundation for Science and Technology within the remit of the project “FCOMP-01-0124-FEDER-037268 (PEst-C/EGE/UI3182/2013)”.

History

School

  • Business and Economics

Department

  • Economics

Published in

Environment and Planning C: Government and Policy

Volume

33

Issue

4

Pages

765 - 779

Citation

AGNELLO, L., CASTRO, V. and SOUSA, R.M., 2015. Is fiscal fatigue a threat to consolidation programmes? Environment and Planning C: Government and Policy, 33 (4), pp. 765-779.

Publisher

© SAGE

Version

AM (Accepted Manuscript)

Publisher statement

This work is made available according to the conditions of the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International (CC BY-NC-ND 4.0) licence. Full details of this licence are available at: https://creativecommons.org/licenses/by-nc-nd/4.0/

Acceptance date

22/10/2014

Publication date

2015

Notes

This paper was accepted for publication in the journal Environment and Planning C: Government and Policy and the definitive published version is available at http://dx.doi.org/10.1177/0263774X15597391

ISSN

0263-774X

eISSN

1472-3425

Language

en

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