We examine austerity in advanced economies since the Great Recession. Austerity shocks are reductions in government … purchases that exceed reduced-form forecasts. Austerity shocks are statistically associated with lower real GDP, lower inflation … advanced economies generates a multiplier consistent with the data. Counterfactuals suggest that eliminating austerity would …

After the Global Financial Crisis a controversial rush to fiscal austerity followed in many countries. Yet research on … the effects of austerity on macroeconomic aggregates was and still is unsettled, mired by the difficulty of identifying … novel approach, we show that austerity is always a drag on growth, and especially so in depressed economies: a one percent …