Search

The empirical relationship among fiscal contractions, permanent improvement in public finances and short-run economic performance is examined using a sample of 14 European countries over the last three decades. The actual experience of policy-making has taught that only the adjustments that relied heavily on primary expenditure cuts and were implemented over a relatively long time span were able to achieve a long lasting reduction of public liabilities. Indeed, during these consolidations, tax increase amounted to a small fraction of the total adjustment. Furthermore, though they unfolded over a longer period with respect to the unsuccessful ones, the overall budget cut was not larger. As regards the macroeconomic impact, successful episodes tended to be associated with improved economic performance. During the adjustment period and in the following two years, the economies experienced strong consumption and investment growth, reduced unemployment, better international competitiveness and falling interest rates. This empirical evidence is here interpreted via the theory known as expectation view of fiscal policy. [ABSTRACT FROM AUTHOR]

We present empirical evidence regarding unemployment dynamics for women and men in eight OECD countries. Unit-root tests are used to examine the unemployment dynamics of women and men. Failure to reject the unit-root hypothesis is consistent with unemployment hysteresis. Rejection of the unit-root hypothesis indicates that unemployment dynamics are best explained by the natural rate of unemployment or the structuralist view. We find evidence of gender differences in unemployment dynamics in Canada, Germany and the US, but not in other countries. While there are some differences in the extent of persistence across gender and across countries, the degree of persistence for both female and male unemployment rates is fairly low in all countries. Our results, therefore, contrast with substantial empirical evidence of high levels of unemployment persistence in European countries. [ABSTRACT FROM AUTHOR]