Expansionary contractions and fiscal free lunches: too good to be true?

Journal article


McManus, R., Ozkan, F. and Trzeciakiewicz, D. 2017. Expansionary contractions and fiscal free lunches: too good to be true? The Scandinavian Journal Of Economics. https://doi.org/10.1111/sjoe.12269
AuthorsMcManus, R., Ozkan, F. and Trzeciakiewicz, D.
Abstract

This paper builds a framework to jointly examine the possibility of both `expansionary fiscal contractions' (austerity increasing output) and fiscal free lunches' (expansions reducing government debt), arguments supported by the austerity and stimulus camps, respectively, in recent debates.

We propose a new metric quantifying the budgetary implications of fiscal action, a key aspect of fiscal policy particularly at the monetary zero lower bound.

We find that austerity needs to be highly persistent and credible to be expansionary, and stimulus temporary, responsive and well-targeted in order to lower debt.

We conclude that neither are likely, especially during periods of economic distress.

KeywordsFiscal policy; austerity versus stimulus; zero lower bound
Year2017
JournalThe Scandinavian Journal Of Economics
PublisherWiley
ISSN0347-0520
Digital Object Identifier (DOI)https://doi.org/10.1111/sjoe.12269
Publication dates
Online11 Sep 2017
Publication process dates
Deposited05 Sep 2017
Accepted31 Aug 2017
Accepted author manuscript
Output statusPublished
Permalink -

https://repository.canterbury.ac.uk/item/88521/expansionary-contractions-and-fiscal-free-lunches-too-good-to-be-true

Download files


Accepted author manuscript
  • 21
    total views
  • 16
    total downloads
  • 0
    views this month
  • 0
    downloads this month

Export as

Related outputs

Managing public debt in the UK
McManus, R., Ozkan, G. and Trzeciakiewicz, D. 2022. Managing public debt in the UK. CESifo Forum. 2022 (1).
Measuring research excellence amongst economics lecturers in the UK
McManus, Richard, Mumford, K. and Sechel, Cristina 2021. Measuring research excellence amongst economics lecturers in the UK. Bulletin of Economic Research. 74 (2), pp. 386-404. https://doi.org/10.1111/boer.12299
Fiscal space and the procyclicality of fiscal policy: the case for making hay while the sun shines
Ahmad, Asif, McManus, Richard and Ozkan, F. Gulcin 2021. Fiscal space and the procyclicality of fiscal policy: the case for making hay while the sun shines. Economic Inquiry. 59 (4), pp. 1687-1701. https://doi.org/10.1111/ecin.13008
Improving drinking water quality in S. Korea: A choice experiment with hypothetical bias treatments
McManus, R., Gschwandtner, A. and Jang, C. 2020. Improving drinking water quality in S. Korea: A choice experiment with hypothetical bias treatments. Water. 12, pp. 1-31. https://doi.org/10.3390/w12092569
SROI in the art gallery: valuing social impact
Jackson, A. and McManus, R. 2019. SROI in the art gallery: valuing social impact. Cultural Trends. 28 (2). https://doi.org/10.1080/09548963.2019.1617937
Tourism boycotts and animosity: a study of seven events
Yu, Q., McManus, R., Yen, D. and Liu, X. 2019. Tourism boycotts and animosity: a study of seven events. Annals of Tourism Research. https://doi.org/10.1016/j.annals.2019.102792
Why are fiscal multipliers asymmetric? The role of credit constraints
McManus, R., Ozkan, G. and Trzeciakiewicz, D. 2019. Why are fiscal multipliers asymmetric? The role of credit constraints. Economica. 88 (349), pp. 32-69. https://doi.org/10.1111/ecca.12340
Fiscal trade-offs: the relationship between output and debt in policy interventions
McManus, R. 2018. Fiscal trade-offs: the relationship between output and debt in policy interventions. The Manchester School. 86 (S1). https://doi.org/10.1111/manc.12241
Who does better for the economy? Presidents versus parliamentary democracies
McManus, R. and Ozkan, G. 2018. Who does better for the economy? Presidents versus parliamentary democracies. Public Choice. 176 (3-4), pp. 361-387.
The broken decade: prosperity, depression and recovery in New Zealand, 1928-39 by Malcolm McKinnon (Otago University Press, Dunedin)
McManus, R. 2017. The broken decade: prosperity, depression and recovery in New Zealand, 1928-39 by Malcolm McKinnon (Otago University Press, Dunedin). The Economic Record. 93 (302), pp. 504-505. https://doi.org/10.1111/1475-4932.12361
A methodology to understand student choice of Higher Education Institutions: the case of the United Kingdom
McManus, R., Haddock-Fraser, J. and Rands, P. 2017. A methodology to understand student choice of Higher Education Institutions: the case of the United Kingdom. Journal of Higher Education Policy and Management. https://doi.org/10.1080/1360080X.2017.1330806
Assessment timing: student preferences and its impact on performance
McManus, R. 2016. Assessment timing: student preferences and its impact on performance. Practitioner Research in Higher Education Journal - Assessment Special Edition. 10 (1), pp. 203-216.
UK pension sustainability and fund manager governance: agent duties to the principal
Shevchenko, K., McManus, R. and Haddock-Fraser, J. 2015. UK pension sustainability and fund manager governance: agent duties to the principal. Journal of Sustainable Finance and Investment. 54 (4), pp. 205-209. https://doi.org/10.1080/20430795.2015.1106209
Austerity versus stimulus: the polarizing effect of fiscal policy
McManus, R. 2015. Austerity versus stimulus: the polarizing effect of fiscal policy. Oxford Economics Papers. https://doi.org/10.1093/oep/gpv023
On the consequences of procyclical fiscal policy
McManus, R. and Ozkan, G. 2015. On the consequences of procyclical fiscal policy. Fiscal Studies. 36 (1), pp. 29-50. https://doi.org/10.1111/j.1475-5890.2015.12044.x