Perverse Fiscal Consolidation *

Abstract: 

In the last three years the IMF has revised upwards the size of fiscal multipliers. This has devastating implications: if the fiscal multiplier is greater than the inverse of the Public Debt/GDP ratio, fiscal consolidation necessarily raises instead of lowering the Public Debt/GDP ratio with respect to what it would have been without consolidation.  This appears to be the case for all or nearly all of advanced countries.

*This article is part of the Paper published in the current issue of Insight Austerity versus Development

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