Austerity: When It Works and When It Doesn't

✍ Scribed by Alberto Alesina; Carlo Favero; Francesco Giavazzi

• Publisher: Princeton University Press
• Year: 2019
• Tongue: English
• Leaves: 291
• Category: Library

✦ Synopsis

A timely and incisive look at austerity measures that succeed--and those that don't

Fiscal austerity is hugely controversial. Opponents argue that it can trigger downward growth spirals and become self-defeating. Supporters argue that budget deficits have to be tackled aggressively at all times and at all costs. In this masterful book, three of today's leading policy experts cut through the political noise to demonstrate that there is not one type of austerity but many.

Looking at thousands of fiscal measures adopted by sixteen advanced economies since the late 1970s, Austerity assesses the relative effectiveness of tax increases and spending cuts at reducing debt. It shows that spending cuts have much smaller costs in terms of output losses than tax increases. Spending cuts can sometimes be associated with output gains in the case of expansionary austerity and are much more successful than tax increases at reducing the growth of debt. The authors also show that austerity is not necessarily the kiss of death for political careers as is often believed, and provide new insights into the recent cases of European austerity after the financial crisis.

Bringing needed clarity to one of today's most challenging subjects, Austerity charts a sensible approach based on data analysis rather than ideology.

✦ Table of Contents

Cover
Title
Copyright
Dedication
CONTENTS
Acknowledgments
1 Introduction
Austerity
Four Contributions of This Book
The Punchline in a Nutshell
Organization of the Book
2 Theory
Introduction
The Simple Keynesian Model
The Future
Confidence and Uncertainty
Austerity and the Business Cycle
Multiyear Plans
Incentives and the Supply Side
Accompanying Policies
Conclusions
3 Expansionary and Recessionary Austerity up to the Financial Crisis of 2008
Introduction
Expansionary Austerity
Recessionary Austerity
Conclusions
4 Measuring the Effects of Fiscal Policy
Introduction
The Empirical Evidence
Multipliers during Austerity: The Early Literature
The Narrative Approach
Conclusions
5 Fiscal Plans
Introduction
Constructing Fiscal Plans
Measuring the Effects of Fiscal Plans
Conclusions
6 The Data
Introduction: A Broad Look at Our Data
The Data in More Detail
Other Data and Sources
Conclusions
7 The Effects of Austerity
Introduction
Taxes versus Expenditures
The Role of Accompanying Policies
An Alternative Specification
Why Do EB and TB Plans Have Different Effects?
Conclusions
8 European Austerity during the Great Recession
Introduction
Europe in the Aftermath of the Financial Crisis
European Austerity
Evaluating European Austerity in 2010–14
The Greek Tragedy
Did Fiscal Multipliers Change after the Crisis?
Conclusions
9 When Austerity?
Introduction
Fiscal Policy in Booms and Recessions
“How” and “When”
The “When” and the How” Together
Austerity at the Zero Lower Bound
Conclusions
10 Austerity and Elections
Introduction
Existing Evidence
Fiscal Plans and Elections
A Few Examples
Discussion
Conclusions
11 Conclusions
12 The Models in Our Book: A User’s Guide
Introduction
Why Simulating Models? A Simple Example
Our Empirical Models: An Overview
The Models Used in the Literature to Measure Multipliers
The Models in Chapter 7
Fiscal Adjustments and the Dynamics of Debt over GDP
TB versus EB Austerity in a General Equilibrium Model
Reconsidering Blanchard and Leigh (2014) in Chapter 8
The Model of “How” and “When” in Chapter 9
Who Adjusts and Who Wins: More Details on the Model for Chapter 10
Notes
References
Index