MAY AUSTERITY BE COUNTERPRODUCTIVE可能会使你感到厌烦.pdfVIP

FACULTAD DE CIENCIAS ECONÓMICAS Y EMPRESARIALES GRADO EN ECONOMÍA MAY AUSTERITY BE COUNTERPRODUCTIVE? Autor: Pablo García Sánchez Tutor: Miguel Sebastián Gascón Curso Académico 2012/2013 03/06/2013 Contents 1. INTRODUCTION 3 2. THE MODEL 5 2.1. AGGREGATE DEMAND 5 2.2. AGGREGATE SUPPLY 9 2.3. PUBLIC DEBT DYNAMICS 9 2.4. SOLVING THE MODEL 9 2.5. UNDERSTANDING THE MODEL 10 3. CALIBRATION 12 4. SIMULATION RESULTS 14 4.1. NEGATIVE DEMAND SHOCKS 15 4.2. NEGATIVE SUPPLY SHOCKS 16 4.3. A COMBINATION OF SHOCKS: THE GREAT RECESSION 18 5. MAY AUSTERITY BE COUNTERPRODUCTIVE? 20 6. CONCLUDING REMARKS 23 7. REFERENCES 24 8. APPENDIX: ESTIMATION METHODOLOGY 25 Abstract This paper investigates the impact that fiscal policy has on economic activity and sovereign debt during economic downturns in the euro area, mainly Germany and Spain. Our theoretical and empirical framework shows that the feasibility of austerity measures depends crucially on the values of the fiscal multipliers. We find that, for the Spanish economy, even if policy makers just focus on the public debt ratio, ignoring output and unemployment, policies of deficit reduction are self-defeating. In fact, counter cyclical policies beat deficit consolidation policies in driving the sovereign debt ratio to a more sustainable path, no matter if shocks are on aggregate supply or aggregate demand. By contrast, in the German case, we cannot reject the hypothesis that austerity may be the proper alternative in a sluggish ec