A competing risks tale on successful and unsuccessful fiscal consolidations
journal contributionposted on 2019-11-19, 10:19 authored by Luca Agnello, Vitor CastroVitor Castro, Ricardo Sousa
This paper analyses the transitions out of fiscal consolidations using annual data for 17 industrial countries over the period 1975-2013 and applying a discrete-time competing risks duration model. More specifically, we rely on a multinomial logit model to distinguish the factors behind a successful or an unsuccessful end of fiscal consolidation episodes. The results show that economic growth, fiscal stance, money market conditions, political orientation and government support, trade openness, the size and typology of fiscal consolidation measures and the occurrence of crises explain the differences in the length and the success/failure of fiscal consolidations. Moreover, while fiscal adjustment programmes that end successfully display positive duration dependence, i.e. they are more likely to end as time goes by, those that end in an unsuccessful manner are not duration dependent.
- Business and Economics