Series: Working Papers. 1516.
Author: Pablo Hernández de Cos and Enrique Moral-Benito.
Published in: Economics Letters, 2016, vol 143, pp. 69-72
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Abstract
In an influential paper, Devries et al. (2011) construct narrative series of tax- and spending-based fiscal adjustments for a panel of OECD countries. In this paper, we find that the adjustments based on spending cuts can be predicted on the basis of past output growth and other macroeconomic variables. Moreover, we illustrate that this source of endogeneity may generate significant differences in the estimated multipliers.