Chapter

The Effects of Fiscal Consolidation on Short-Term Growth: A Review and Implications for the UK

Katarzyna Anna Bilicka, Michael P. Devereux and Clemens Fuest

in Taxation and the Financial Crisis

Published in print February 2012 | ISBN: 9780199698165
Published online May 2012 | e-ISBN: 9780191738630 | DOI: http://dx.doi.org/10.1093/acprof:oso/9780199698165.003.0010

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This chapter analyses the economic situation in the UK as it attempts to recover from the financial and economic crisis that began in 2008. In particular, we focus on the probability that the fiscal consolidation, introduced by the new coalition government in 2010, is likely to be expansionary or contractionary. To analyse this we first briefly survey the large economic literature on the impact of government borrowing on economic growth. We identify the key factors that empirical evidence suggests affect the probability that a fiscal consolidation will be expansionary. We then examine these factors in the context of the UK to identify whether they are favourable or not towards the consolidation being expansionary.

Keywords: fiscal consolidation; economic growth; government borrowing

Chapter.  9538 words.  Illustrated.

Subjects: Financial Markets

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