RT Journal Article
T1 How much is a lot? The maximum size of fiscal adjustments
A1 Escolano, Julio
A1 Jaramillo, Laura
A1 Mulas Granados, Carlos
AB The sizeable fiscal consolidation required to stabilize the debt-toGDP ratios in several countries in the aftermath of the global crisis raises a crucial question on its feasibility. To answer this question, we propose a methodology to identify historical fiscal adjustment episodes for countries that both needed and wanted to adjust in order to stabilize debt to GDP. We identify 91 adjustment episodes in 49 countries during 1945–2014. We find that countries typically improved their cyclically adjusted primary balances by close to 5 percent of GDP. We also observe that countries make substantial efforts to stabilize debt, but ease their primary balances once this objective is achieved, without getting back to their initial lower debt-to-GDP ratio. Consolidations were larger when sustained over time and the initial deficit was high. Fiscal adjustments were also larger when accompanied by monetary easing and, to a lesser extent, by an improvement in credit conditions.
PB Taylor and Francis
SN 1667-6726
YR 2018
FD 2018
LK https://hdl.handle.net/20.500.14352/19362
UL https://hdl.handle.net/20.500.14352/19362
LA eng
DS Docta Complutense
RD 25 feb 2026