Description
Summary: | This paper examines the macroeconomic effects of different timing and composition of fiscal adjustment in the United Kingdom using the IMF's Global Fiscal Model. Early consolidation dampens aggregate demand in the short term, but increases output in the long term as smaller primary surpluses are needed as a result of lower interest payments. Reducing government transfers or current government spending provides larger gains than increasing taxes, in particular compared to raising corporate or personal income taxes. We show that these conclusions are robust under alternative behavioral assumptions and parameterizations. A reduction in global saving would make early consolidation more urgent from both cyclical and long-term perspectives. Finally, we show that tax reform aimed at increasing incentives to save could provide support to fiscal consolidation measures.
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Physical Description: | 1 online resource (22 pages) : illustrations |
Format: | Master and use copy. Digital master created according to Benchmark for Faithful Digital Reproductions of Monographs and Serials, Version 1. Digital Library Federation, December 2002. |
Bibliography: | Includes bibliographical references. |
ISBN: | 1283516136 9781283516136 9781451908848 1451908849 1462352839 9781462352838 1452750149 9781452750149 9786613828583 6613828580 |
ISSN: | 2227-8885 ; |
Language: | English. |
Reproduction Note: | Electronic reproduction. |
Source of Description, Etc. Note: | Print version record. |
Action Note: | digitized |