Table of Contents
Acknowledgments xi
1 Introduction 1
Austerity 1
Four Contributions of This Book 8
The Punchline in a Nutshell 10
Organization of the Book 14
2 Theory 17
Introduction 17
The Simple Keynesian Model 18
The Future 20
Confidence and Uncertainty 22
Austerity and the Business Cycle 23
Multiyear Plans 23
Incentives and the Supply Side 24
Accompanying Policies 26
Conclusions 28
3 Expansionary and Recessionary Austerity up to the Financial Crisis of 2008 29
Introduction 29
Expansionary Austerity 31
Recessionary Austerity 42
Conclusions 49
4 Measuring the Effects of Fiscal Policy 50
Introduction 50
The Empirical Evidence 51
Multipliers during Austerity: The Early Literature 56
The Narrative Approach 59
Conclusions 63
5 Fiscal Plans 64
Introduction 64
Constructing Fiscal Plans 65
Measuring the Effects of Fiscal Plans 70
Conclusions 72
6 The Data 73
Introduction: A Broad Look at Our Data 73
The Data in More Detail 78
Other Data and Sources 93
Conclusions 94
7 The Effects of Austerity 95
Introduction 95
Taxes versus Expenditures 95
The Role of Accompanying Policies 105
An Alternative Specification 112
Why Do EB and TB Plans Have Different Effects? 113
Conclusions 116
8 European Austerity during the Great Recession 117
Introduction 117
Europe in the Aftermath of the Financial Crisis 118
European Austerity 123
Evaluating European Austerity in 2010-14 141
The Greek Tragedy 148
Did Fiscal Multipliers Change after the Crisis? 157
Conclusions 158
9 When Austerity? 160
Introduction 160
Fiscal Policy in Booms and Recessions 161
"How" and "When" 163
The "When" and the How" Together 166
Austerity at the Zero Lower Bound 170
Conclusions 174
10 Austerity and Elections 175
Introduction 175
Existing Evidence 176
Fiscal Plans and Elections 180
A Few Examples 183
Discussion 187
Conclusions 192
11 Conclusions 194
12 The Models in Our Book: A User's Guide 203
Introduction 203
Why Simulating Models? A Simple Example 204
Our Empirical Models: An Overview 205
The Models Used in the Literature to Measure Multipliers 206
The Models in Chapter 7 214
Fiscal Adjustments and the Dynamics of Debt over GDP 222
TB versus EB Austerity in a General Equilibrium Model 224
Reconsidering Blanchard and Leigh (2014) in Chapter 8 227
The Model of "How" and "When" in Chapter 9 232
Who Adjusts and Who Wins: More Details on the Model for Chapter 10 240
Notes 251
References 259
Index 267
