Fiscal consolidation in Europe: has it worked?

ABSTRACT

The aim of this article is to shed some light on the issue of fiscal austerity within Europe. We focus specifically on the 2008Q1–2014Q4 period, and on the effect of shocks to government expenditure and taxes on unemployment, controlling for other macro factors. We find that expenditure contractions may be detrimental for employment.

KEYWORDS:

• Fiscal austerity
• unemployment
• Europe

JEL CLASSIFICATION:

• C11
• C33
• E23
• E52
• E62

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

¹ The series of government revenue were only available in nominal terms from the data source. CPIs have been used to deflate them, except for France where the GDP deflator has been used.

Additional information

Funding

The authors gratefully acknowledge financial support from the MINECO (Ministerio de Economía y Competitividad, Spain) research grant ECO2014-58991-C3-2-R, and the Generalitat Valencia project AICO/2016/038. Javier Ordóñez also acknowledges the Universitat Jaume I P1.1B2014-7 project and the Generalitat Valenciana project PROMETEOII/2014/053.