Countries under credit stress should ‘front-load’ fiscal consolidation, says ECB paper
Front-loading will bring confidence effects
Countries under credit stress will benefit from confidence effects if they "front-load" fiscal consolidation rather than postponing it, a working paper published on October 28 by the European Central Bank (ECB) finds.
Alessandro Cugnasca and Philipp Rother construct a new data set of fiscal adjustments to identify "exogenous policy changes" in their paper, Fiscal multipliers during consolidation: evidence from the European Union.
"Confidence effects would strongly reduce, or even eliminate, the
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