Austerity is a concept that is often used in the public debate. It refers to fiscal policy measures that reduce government spending and raise taxes for the purposes of closing a government budget deficit. This paper analyzes the concept in the context of the current European economic crisis and...

We empirically assess whether a usually expected negative response of private consumption and private investment to a fiscal consolidation is reversed. We focus on a large sample of 174 countries between 1970 and 2018. We also employ three alternative measures of the Cyclically Adjusted Primary...

The recent financial crisis was characterized by the sizeable fiscal cost of banking sector bail out operations and the significant automatic and discretionary fiscal policy response to shrinking output, which have put increased pressure on public finances in many industrialized countries. This...

Should policymakers wait for fiscal crisis early warning signals before repairing the roof? We give an answer to this question by investigating the interlinkages between early warning signals for fiscal crisis, policy responses, and policy outcomes, using a broad panel of 119 countries. We find...

This paper complements the empirical literature on sovereign debt restructurings by analyzing potential determinants of (near-term) follow-up restructurings after a restructuring has taken place. The probability of follow-up restructurings is estimated by means of survival models using a unique...

In response to the global crisis a number of new institutional measures have been introduced in the fiscal framework, both on the UE and on the member states’ level, and the question is: have these measures provided better fiscal sustainability outcomes? We approach this question by looking at...

The current crisis calls for two main sets of policy measures. First, measures to repair the financial system. Second, measures to increase demand and restore confidence. While some of these measures overlap, the focus of this note is on the second set of policies, and more specifically, given...

After 2008, the Southern European economies suffered a strong and persistent increase in unemployment. Rising government bond spreads necessitated the implementation of austerity policies. Austerity however, may increase unemployment. If workers lose human capital during unemployment spells, the...

The paper compares fiscal cyclicality across regions and countries from 1960 to 2016. It finds that more than half of 170 countries analyzed in seven regions had, in more recent years, limited fiscal space, and that their fiscal policy was either cyclical or procyclical. This was particularly...