• Open Access

Uncertain Fiscal Consolidations


  • We are grateful to Alberto Alesina and Silvia Ardagna for providing us with their data set. We thank the editor, Wouter Den Haan, and an anonymous referee, as well as Nicoletta Batini, Paul Beaudry, Isabel Correia, Tobias Cwik, Michael Devereux, Kenneth Kletzer, Charles Nolan, Federico Ravenna, Gregor Smith, Harald Uhlig, Jürgen von Hagen and participants at the Swiss National Bank workshop, the Bank of Canada Fellowship workshop, the European Economic Review Young Economist Workshop, the University of Loughborough Seminar and the Conference on Monetary Policy in an Era of Fiscal Stress at Riksbank for many useful comments. Campbell Leith is grateful for financial support from the ESRC, Grant No. RES-062-23-1436. The views expressed in this article are those of the authors and not of the Bank of Canada.

Corresponding author: Campbell Leith, University of Glasgow, West Quadrangle, Gilbert Scott Building, Glasgow G12 8QQ, UK. Email: Campbell.Leith@glasgow.ac.uk.


This article explores the macroeconomic consequences of fiscal consolidations whose timing and composition – either tax–or spending– based – are uncertain. We find that the composition of the fiscal consolidation, its duration, the monetary policy stance, the level of government debt, and expectations over the likelihood and composition of fiscal consolidations all matter in determining the extent to which a given consolidation is expansionary or successful in stabilising government debt. We argue that the conditions that could render fiscal consolidation efforts expansionary are unlikely to apply in the current economic environment.