Critical thresholds for budget consolidations: a semi-parametric approach

Author First name, Last name, Institution

K. Peren Arin, Zayed UniversityFollow
Torben Kuhlenkasper, Hochschule Pforzheim
Anup Menon Nandialath, Zayed University

Document Type

Article

Source of Publication

Applied Economics Letters

Publication Date

1-1-2015

Abstract

© 2015 Taylor & Francis. While a lot is known regarding the determinants of successful fiscal consolidations, previous studies do not allow for the possibility of nonlinearities in factors impacting budget consolidations. By using a semi-parametric modelling approach employing penalized spline regression on a data-set for 28 OECD countries for the period 1978–2007, we demonstrate the existence of critical thresholds not only for the initial debt level but also for the accompanying monetary policy. The latter result shows when monetary policy matters most and suggests, counter to previous studies, that too lax a monetary policy decreases the success probability of a fiscal adjustment episode.

DOI Link

10.1080/13504851.2015.1026574

ISSN

1350-4851

Publisher

Routledge

Volume

22

Issue

16

First Page

1293

Last Page

1297

Disciplines

Business

Keywords

fiscal consolidations, generalized additive models, monetary policy, nonparametric methods

Scopus ID

84939468946

Recommended Citation

Arin, K. Peren; Kuhlenkasper, Torben; and Nandialath, Anup Menon, "Critical thresholds for budget consolidations: a semi-parametric approach" (2015). All Works. 1125.
https://zuscholars.zu.ac.ae/works/1125

Indexed in Scopus

yes

Open Access

no