Budget Consolidation: Short-Term Pain and Long-Term Gain

WPIEA2010163 Image
Price:  $18.00

Author/Editor: Douglas Laxton, Susanna Mursula, Kevin Clinton, Michael Kumhof
Release Date: © July, 2010
ISBN : 978-1-45520-146-4
Stock #: WPIEA2010163
Stock Status: On back-order

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The paper evaluates the costs and benefits of fiscal consolidation using simulations based on the IMFs global DSGE model GIMF. Over the longer run, well-targeted permanent reductions in budget deficits lead to a considerable increase in both the growth rate and the level of output. The gains may be enhanced by shifting some of the tax burden from incomes to consumption. In the short run, credibility plays a crucial role in determining the size of initial output loses. Global current account imbalances would be significantly reduced if budget consolidation was larger in countries with current account deficits.


Economic policy , Fiscal policy

More publications in this series: Working Papers

More publications by: Douglas Laxton ; Susanna Mursula ; Kevin Clinton ; Michael Kumhof