Fiscal Contractions in Eurozone in the years 1995-2012: Can non-Keynesian effects be helpful in future deleverage process?

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Mehmet Huseyin Bilgin • Hakan Danis •

Ender Demir • U gur Can

Editors

Business Challenges in the

Changing Economic

Landscape

-

Vol

.

1

Proceedings of the 14th Eurasia Business

and Economics Society Conference

Biblioteka

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310000633060

Editors

Mehmet Huseyin Bilgin Faculty of Economics

Istanbul Medeniyet University Istanbul

Turkey

Hakan Danis

MUFG Union Bank San Francisco, CA USA

Ender Demir Faculty of Tourism

Istanbul Medeniyet University Istanbul

Turkey

Ugur Can

Eurasia Business &Economic Society Fatih Istanbul

Turkey

The authors of individual papers are responsible for technical, content, and linguistic correctness.

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ISSN 2364-5067 ISSN 2364-5075 (electronic) Eurasian Studies in Business and Economics

ISBN 978-3-319-22595-1 ISBN 978-3-319-22596-8 (eBook) DOI 10.1007/978-3-319-22596-8

Library of Congress Control Number: 2015954180

I

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~-ir:~ _..~

Fiscal Contractions

in Eurozone in the Years

1995-2013:

Can Non-Keynesian

Effects

'

Be

Helpful in Future Deleverage

Process?

Adam P. Balcerzak, Michał Bernard Pietrzak, and Elżbieta Rogalska

Abstract Last global financial crisis has led to massive fiscal stimulation actions in

EU which resulted in significant increase of public debt. As a result, in near future

EU countries will have to adopt much stricter long term fiscal policy that will be

necessary for deleveraging process. In this context the aim of the research is to

check whether one can find non-Keynesian effects of fiscal consolidations in

Eurozone countries in last decade. If the answer is positive, then could these

non-Keynesian effects be significant developing factor. The third scientific question concentrates on the ways the fiscal consolidations were implemented and the potential influence of consolidations strategies on short term growth. The research is based on European Commission and Eurostat fiscal and macroeconomic data for

the years 1995-2013. The econometric dynamie panel model based on the concept

of conditional convergence was applied. As a complementary method qualitative analysis of cases of significant contractions was used with the concentration on the

differences between expansionary and conventional Keynesian cases of fiscal

contractions. The research gives sorne arguments for existence of fiscal transitions

channels leading to non-Keynesian effects of fiscal policy, which in the same time

can be a factor of conditional convergence.

Keywords Fisćal policy • Fiscal consolidations • Non-Keynesian effects • Conditional convergence

A.P. Balcerzak (121)

Department of Economics, Nicolaus Copernicus University, Toruń, Poland e-mail: apb@umk.pl

M.B. Pietrzak

Department of Econometrics and Statistics, Nicolaus Copernicus University, Toruń, Poland e-mail: michal.pietrzak@umk.pl

E.Rogalska

Department of Microeconomics, University of Warmia and Mazury, Olsztyn, Poland

e-mail: e.rogalska@interia.pl

© Springer International Publishing Switzerland 2016

M.H. Bilgin et al. (eds.), Business Challenges in the Changing Economic

Landscape - Vol. l, Eurasian Studies in Business and Economics 2/1,

DOI 10.1007/978-3-319-22596-8_35

1

Introduction

-,

484 A.P. Balcerzaket al

.-The end of twentieth century was a period when most academic economists'·

decision makers accepted the view that the anti -cyclical policy should be)rl~r based on the monetary tools. In that period many believed that principals of pr~~.

.fiscal policy should be concentrated on the middle and long term aims support'

long term growth. As it was stated by Martin Eichenbaum: "In sharp contrast to t

views that prevailed in the early 1960s, there is now widespread agreement

tl

i

countercyclical discretionally fiscal policy is neither desirable nor politically fe sible. Practical debates around stabilization policy revolve almost exclusiv~h

around monetary policy" (Eichenbaum 1997, p. 236). In that time a wide reseafc on the possibility of non-Keynesian effects of fiscal consolidations was started (s:

Giavazzi and Pagano 1990; Alesina and Ardagna 1998).

In the sphere of fiscal policy in European Union last decade of twentieth and tlr beginning of twenty-first century were influenced with the process of Eurozort'"

creation and the efforts to fulfi11Maastricht Treaty criteria. As a result in that periq

a significant decrease of government debt for countries that created euro area was obtained. The average level of govemment consolidated gross debt for first 11 meh}

bers of the Eurozone decreased from the level of 69 %of their GDP in 1995 to 54~.

in 2007. c

However, global financial crisis that started in the year 2008, at least in·!Be sphere of fiscal policy practice of developed countries, has led to a serious chang{t

the approach to fiscal policy. Most European countries implemented massive fi.~~

policy stimulation program s that in Keynesian way were supposed to incie-ą§

aggregate demand and bring short term anti-crisis effects. This resulted in signr icant increase of govemment debts in European Union that in longer term2~

become serious obstacle for growth. In case of mentioned 11 first members of

-area the average level of govemment consolidated gross debt rose from the

m

e

tioned 54 % in 2007 to 89.2 % in 2013. In case of the Eurozone (27 countries)

tli

value rose from the average level of 58.9 % in 2007 to 87.4 % of GDP in 2013..

In this context three scientific questions are the base for that paper. First ofa the aim of the research is to check whether one can find non-Keynesian effectso

fiscal consolidations in Eurozone countries in last two decades. If the answer i positive, then could these non- Keynesian effects besignificant developing facto(

case of Eurozone countries? The third scientific question concentrates on the w~~

the consolidations were implemented and the potential influence of eonsolidario strategies on short term growth.

In order to find the answer to the first two questions the hypothesis of conditioni ~-convergence for 11 countries that started euro area for the years 1995-2013 wa~:.

tested. As the variabies determining the output in the steady state the investments per capita and the government primary balance describing the fiscal policy wefę:

used. The verification of hypothesis of ~-convergence process enables to identiff

the longterm tendency of output per capita among analyzed countries. In the sanie time verification of the hypothesis enables to identify non-Keynesian effects 9L~

::-:..J- .

- -,;

t~

;47·

Fiscal Contractions inEurozone inthe Years 1995-2013: Can Non-Keynesian ... 485

fiscal prudence as a positive influence of fiscal restrictive policy on the level of output per capita. The empirical part is based on the Eurostat database data. The data conceming primary balance was taken from European Commission report (2013).

The artic1e consists of three parts. In the first one the theoretical background conceming the non-Keynesian effects is discussed, The second and third parts have strictly erripirical nature..The second part is devoted to econometric ana1ysis of consequences of fiscal prudence. Here the econometric dynamie panel model based on the concept of conditional convergence was applied. In the third part qualitative analysis of cases of significant consolidations was made with the concentration on the differences between expansionary thus non-Keynesian cases and conventional Keynesian cases of fiscal contractions.

2

Fiscal Consolidations as a Positive Supply Shock

Supporting Convergence

Based on the basie textbook approach in the long term prudent (defined as rather restrictive) fiscal policy is considered as a factor supporting capital accumulation and productive investments. Thus, it is improving long term growth and can be a factor supporting economic convergence. On the other hand, form the short term Keynesian perspective fiscal consolidations tend to negatively influence aggregate denland and with multiplier effects dampen current growth, whereas fiscal expan -sions in spite of the possibility of crowding out effects (Balcerzak and Rogalska 2014) tend to support current activity of economy and short term growth.

However, the end of 1980s with the experiences of Denmark in the years 1983-1984 and Ireland in the years 1987-1989 showed the possibility of not standard short term effects of fiscal restrictions, where thc improvement of govemment fiscal balance led to increase of aggregate demand and produet. New research program conceming expansionary (non-Keynesian) effects of fiscal consolidations was starte d (Giavazzi and Pagano 1990).

The models explaining the transmission mechanisms of non-Keynesian effects of fiscal consolidations are usually c1assified to twa groups. The first one attributes the non-Keynesian effects to the dem and side of economy and the results of expectations change of private agents in the situation of uncertainty conceming their future tax burden (Rogalska 2012). This mechanism is based on the expecta-tion ofhouseholds that due to current fiscal consolidations the future taxburden will decrease, which is the source of wealth effect. As a result the households that tend to smooth their consumption during their lifespan can increase their current eon-sumption, which under positive circumstances (for example determined by the

relation between the agent s maximizing their consumption during their whole

lives andliquidity constrained agents depending ontheir current income) can offset

2009). In that context three factors tend to increase the possibility of non-Keynes

occurrence. First of all, the scale of consolidations must be big enoughto conv:

the households that there is a real chance for lower tax burden in the future. '

second condition is the credibility of fiscal authorities. The householdmusi-b-ę

that the government is not going to change the prudent fiscal policy with tfiKml improvement of situations. In that context the third factor which is current b~ situation can be also decisive. Some models predict that in case of very higli

growing level of public debt when the household expect that the level of debr]

sustainable. , it must result in inevitable and significant increase of taxes.,

implementation of strict consolidations can be a reason for change of expect~!:

(see Perotti 1999).

-r-The second group of model sconcentrates on the supply side of economy aria'1:

positive influence of reducing government expenditures on the costs level andiłi"

competitiveness of enterprises (Rzońca and Ciżkowicz 2005). In the literature.fu,:e

are many models concentrating on the supply side of economy and reactions. ..•••.

enterprises to fiscal adjustments. The most important determinant ofresults offi;ć~<td~",

consolidations is the composition of adjustment (Rzońca and Varoudakis 200

Alesina et al. 1999; Lane and Perotti 2001; Alesina and Ardagna 1998, 20Q

Alesina and Perotti (1997) were investigating supply side effects of fiscal adr

ments in unionized economies with imperfect competition markets. In case of lą

markets with strong unions, fiscal consolidations that were mainly based on incQ

tax increases were resulting in increased pressure on wage rises, thus increasi

costs of enterprises and diminishing their price competitiveness. In the end thi{~

become additional negative supply shock that can threaten effectiveness of fi{

adjustment. On the other hand, the strategy based on public expenditures cut~~J

case of positive influence on enterprises price competitiveness can have of~~i results. When the lower public expenditures are the result of wages cuts and l~~

employment in public sector, the lack ofpossibilities of earning and lower wages'ln.='

public sector can decrease the wage pressure in private sector, which can influenśę

-positively enterprise profits and increase their investment capabilities. The

finał

-

- _•

consequence of this mechanism can be higher international price competitiven~;;,'

_ :~,~"'i

of enterprises and it can result in non-Keynesian results of fiscal consolidatioii; '_

(Alesina and Ardagna 2009). Of course, the whole mechanism is quite complex

a

r

i,

~

L

:

it depends on many factors such as the influence of export channel on the natioriJrC

\ _ r~"

economy, the ratio of labor costs to global costs of enterprises, the speed and nite~(jt.-'

influence of positive supply shock in the sphere of labor costs. ~~

-Concentrating on the problem of relation of short term fiscal policy and mi'dd.lli',.

or long term growth, thus the chances for obtaining the convergence process, t~~-'~

effectiveness of transmission mechanisms of the supply side model s is crucial. In",:

this context from the perspective of supply side economy, the basie role of goverIi~'

-ment should be decreasing the price rigidity on the produet markets and increasing

elasticity of labor markets. When the markets are characterized with sufficient'. __

elasticity the export channel can be a factor increasing the chances for successfu]

-fiscal consolidations. Based on that approach, in case of short term fiscal policy

consolidation actions should rather concentrate on the effort to reduce government

~

--~-..

-:;L_.__

--I" -

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Fiscal Contractions inEurozone in the Years 1995-2013: Can Non-Keynesian ... 487

expenditures than the programs of tax and revenue increases (see more Alesina and Ardagna 2009).

3

Fiscal Prudence and Conditional Convergence:

Econometric Analysis

In order to verify the hypothesis of the paper the convergence analysis for the fi.rst 11 euro zone mernbers was done. The parameters of the dynamie panel model for

1995-2013 were estimated, which enable to identify conditional jJ-convergence

process. The convergence analysis framework has been widely discussed in the literature. The problems of absolute convergence, conditional jJ-convergence, o-convergence, club-convergence, stochastic convergence and application of

panel models or tools of spatial econometric for the convergence analysis were discussed by Baumol (1986), Barro and Sala-i-Martin (1991, 1992, 1995), Bond et al. (2001), Caselli et al. (1996), Sala-l-Martin (1996a, b), Mankiw et al. (1992),

Durlauf and Johnson (1995), Quah (1993a, b, 1996a, b), Bernard and Durlauf (1995), Evans and Karras (1996), Islam (1995), Rey and Montouri (1999),

Le GalIo and Ertur (2003), Ciołek (2005), Arbia (2006).

The phenomena of jJ-convergence means that aU the analyzed countries in the

long term converge in terms of income per capita. In a given period that common income per capita is reached within the long term steady state. The convergence phenornena was enriched with conditional p-convergence where one assumes {hal

every country tend to reach his own steady state. The income level in the steady state for every region is determined by economic process that characterize the

fundamental conditions of economy such as the investment rate and depreciation, the demographic processes and population growth, the quality of human capital, and thetechnology (see Mankiw et al. 1992;Levine and Renelt 1992).In case ofjJ'

-convergence the countries can reach the same incorne 1evel but only provided that

they are similar in terms of econornic variables that deterrnine the output in the

steady state.

The hypothesis of conditional jJ-convergence wastested by estimation ofparam -eters of dynamie panel model (Baltagi 1995) that isdeseribed with theEq. (3). The

dependent variable was GDP per eapita in purehasing power standards. The ind

e-pendent variable wasthe real investment per eapita andtheprimary balanee defined

as governrnent net lending or net borrowing excluding interest, whieh is variable

that eharaeterize the fiseal policy approach. The positive value of that variable is

equivalent to government surplus whereas negative means the government deficit.

In the context ofthe theoretical background described in"Fiscal Consolidations asa

Positive Supply Shoek Supporting Convergence" of the paper that parameter <Xl

b = -ln(y)/T,

488

Y;t =/30 - /311nYit-1

+

alXI,it

+

a21nX2,it

+

Tli

+

Cit·

Y~

=

ln(Yir/Yit-l)

lnYit

=

/30

+

ylnYit-1

+

alXI,it

+

a2lnX2,it

+

Tli

+

Cit

r --:(1 - (31)

• c_• __

Where: Yit is the vector of GDP per capita, Y7t is the vector of the rate of grov,rtlf

GDP per capita, X, is the vector of primary balance describing fiscal prud~ri2

vector X2 describe the investment per capita, /30,/31, aj, a2, Y are the struqu:r

parameters of the model n, is the vector of individual effects of a panel model»

e.,

is the vector of disturbances. All the variables are determined for i-country inT period t. Variables X, and X2 are the potential variables that determine the outpu(

the steady state.

Obtaining the- statistically significant value of parameter that is lower than positively y verifies the hypothesis of conditional ~-convergence for the analyzed countries. The convergence process will occur provided that all the countries

w

f

r

.

be characterized with similar level of variables that determine the output in

tli

steady state. The lower value of y (higher positive value of parameter ~1)the fas!:e'

convergence process occur, The identification of convergence process enables_'::

answer the question concerning the economic variables that determine the pos bility of convergence process between a given group of countries. Additionally] estimated value of parameter y enables to estimate average annual speed of c vergence and the time that is needed for reaching the half the distance between starring level of outpur and the output in the steady stare (see Barro and S8Ja~~l Martin 1995; Ciołek 2005). The average speed of convergence/ is described

wi

the Eq. (5):

and the time that is needed for reaching the half way between the average startin level of GDP and the GDP in the steady state is given with Eq. (6):

T = -ln(2)/ln(y).

In the model of convergence described with the Eq. (1) the growth rate of GDP p~

capita depends on the fiscal policy prudence which is understood as rather restric-tive fiscal policy approach and the level of investments per capita. Obtaining thę

positive estimate of the parameter al means that there is a positive influence Q'

fiscal consolidations in a given period t on the rate of growth of GDP per capif during all the period of analysis. It can be interpreted as the occurrence o.

IIt means that the value of parameter fJI is positive.

2T is the num ber of years, for which the rate of GDP growth is estimated. In case of panel models,

:.:...-_.~ .. >, ~ -:c~-'-i f"-

iL-~:-f:;:~

-1

Fiscal Contractions in Eurozone in the Years 1995-2013: Can Non-Keynesian. _. 489

Table 1 The estimated

conditional p-convergence

modela Pct~~ct-~---Tp~~~tim-~;----~a~ -r ~ 0.887992

I

~o.ooo al 10.00612837

I

~O.OOO a2 10.134660

I

~O.OOO ·-Testy statystyczne Sargan Test 110.3058 - 10.0093 ---~--- -10.4366 Al3-_(l) 1-2.60076 AR(2)

i

-0.777938

-Source: Own estimation based on Eurostat data and European

Commission (2013)

aThe calculations were made with the application of the GRETL

software (version 1.9.7)

non-Keynesian effects of fiscal policy for 11 analyzed countries of the European

Union.

Inorder toestimate the parameters of model (3) the system GMM estimator was used (Blundell and Bond 1998), which is a development of first-difference GMM

estimator (Holtz-Eakin et al. 1988; Arellano and Bond 1991; Ahn and Schmidt 1995). The idea of system GMM estimator is the estimation of both equations in first differences and equations in levels. The results of two-step estimation with asymptotic standard errors are presented in the Table l.

The Sargant test enables testing of over-identifying restrictions (Blundell et al. 2000). The obtained statistic of the test equals 10.3058 and we reject the null hypothesis. All instruments were proper. Autocorrelation of the first -differenced of disturbances was tested too. The statistic of the test for first-order

serial correlation equals -2.6007 and we reject the null hypothesis that there is no first-order serial correlation. The statistic of the test for second-order serial corr e-lation equals -0.7779 and we does not reject the null hypothesis ofno second-order

serial correlation (Baltagi 1995). It means that the system GMM estimator was consistent and efficient.

The parameter

r

is statistically significant. The estimate ofthe parameter

r

which

is below l enables to estimate the value of parameter Pl equal to 0.1120 and verification of the hypothesis of convergence. The average annual speed of eo n-vergence is equal to 11.88 % of the distance provided similar level of investments and the degree of restrictiveness of fiscal policy for aU the countries. It means that

the time needed for reaching the half way between average starting output and the output in the steady state is 5.8 years.

Both parameters al and a2 are statistically significant. It means that variabies XI

and X2 significantly determine the convergence process for 11 countries. The

positive estimate of the parameter al suggests positive influence of restrictive fiscal policy and it can be interpreted as a confirmation of non-Keynesian effects of fiscal

consolidations. The positive estirnate of the parameter a2 means the same direction

of changes between investment per capita and the rate of growth per capita which is

consistent with basie macroeconomic theory. It should be remembered that the

490

4

Qualitative Analysis of Fiscal Consolidations

fiscal policy for all the analyzed countries and similar level of investment per ca could result in the estimated convergence process. Thus, the question conce'

the possibility of obtaining similar level of investment and unified fiscal policy

-important policy problem. When the answer to this question is negative the

ay

speed of convergence equal to 11.88 % will not be reached.

The aim of this part of the paper is to analyze the fiscal consolidations from perspective of their Keynesian or non-Keynesian results and the questionon"

differences in the way both group of adjustments were implemented. The

ni

1

".

!

:c

question can be formed as follows: Were the expansive (non-Keynesian) cons~li~

dations mostly based on revenue increases or rather expenditure reductions? .-~=

Based on both demand and supply side theoretical models previously discusse one can point that the analysis should concentrate only on significantly big con~& -idations. Concentrating onl y on significantly big adjustments is also necessary

ą§

?

i

is required to omit minor cyclical changes of budged balance and the infl.uencęJ~f automatic stabilizers that are not the result of policy reaction. As a result for'

research the significant fiscal consolidation is defined as the one when the gen.

government primary balance improves more than 2.5 %point of GDP in l yearó

least 3 % of GDP in 2 consecutive years. This definition is alittle stricter than:

one applied by Purfield in research of fiscal adjustment in transition countrięs she assumed 2 % pint of GDP improvement for l year (Purfield 2003).

The first step of the analysis was the c1assification of episodes on two gro~

expansionary thus non-Keynesian episodes and Keynesian consolidations. T

definition of expansionary (non-Keynesian) episode is the following: the consi dation episode is expansionary when the average GDP growth during the COll§9 c

idation and l year after the consolidation is above the average growth rate;~ potential GDP (compare Purfield 2003). Based on that definition 14 non-Keynesiąn and 4 Keynesian episodes were selected, which are presented in Table 2.

Table 3 presents fundamental macroeconomic data for aU analysed episodes·~Qf"=

fiscal consolidations. First of all, for 15 analysed episodes only in case of t~9~

Portugal in 2011 and Spain in 2013 one could see negative GDP change, which c . be attributed to difficult condition of both economies after global financial cri from the year 2008. In case of composition of episodes, most of them h( ave mix~. -,

character with some increases of revenues and cuts of expenditures. Only

l

~o

.

episodes-Belgium in 2006 and Finland in 1996 an increase in expenditures and.

more than proportional increase in revenues could be seen. Three episodes Ireland

in 2011, Austria in 1998-1999 and Finland in 1997-1998 were based on decreasein.

both revenues and expenditures.

Figure 1 presents average annual changes of govemment budget revenues aqdf:,

expenditures for the group of non-Keynesian and Keynesian episodes of fiscal..,.'

,

_{-- 1-}

~

Fiscal Contractions in Eurozone inthe Years 1995-2013: Can Non-Keynesian ... 491

Table 2 Fiscal episodes

fulfilling the criteria of

significant consolidation

-..- .. .-. - -_..--...__.. .- .._--. ·--T.--·----.---·---·-

.·-Non-Keynesian consolidations !Keynesian consolidations

Belgium 12006 . .

I

Germanq 1996 -Germany ! 1999-2000

I

Luxemburg 12006-2007 12006-2007 II. Po~ugal 12011 '12011

l

Spam ~:2=0=0=0===== Ireland !2011

I

.

_

-

+1

_

[2012 i . I ---,---;---.---t--- ..-- -Austria 11998-1999! 1,..-- _ 12007

I

Jr

---Luxemburg I1997

I

12000

1

-·---~ortug~l 12006-2007 I _ Finland

1

1996

,

---r---I .1997-1998

i

-

r

--

I

--

_

_~pa~_ ..

.

L

~°J

.

.

~

.

._

l_

_

.

__

.

__..

i _

non- Keynesian consolidations was -2.67 %of GDP whereas for group of Keyne s-ian episodes it was -3.5 %. However, a serious difference can be seen in case of annual change of revenues. For the group of expansionary episodes the average increase of revenues was three times lower than in the group of Keynesian eonsol -idations, which can suggests that expansionary episodes were based on the tax

increases to much lesser extent than the non-expansionary episodes. These results are conducive to the research of Alesina and Ardagna (2009) for OECD countries in •.h~ "p',,"« 107() ')()()7

\..J...&.\,.;" JV(..U":> ~./ IV-L"VV I •

First of aU, in case of interpretation of the above presented results it must be

remembered that this kind of qualitative analysis has serious methodological drawback. The.main problem is the small number of examined consolidations; in

that case especially the number of Keynesian episodes is not satisfactory. Then all the qualitative analyzes are quite sensitive to changes of definitions of significant and expansionary episodes. Thus these results can be only treated as a voice in the

discussion, definitely not as prevailing argument.

S

Conclusion

The end of the twentieth and the beginning of the first decade of current century

made a period of significant deleverage and public finance stabilization, which was

in part the element of process of the Eurozone creation. That situation was changed

with the glob al financial crisis of the year 2008 that resulted in the significant

increase of government debt of highly developed countries.

The conducted econometric analysis gives significant arguments on the thesis

that last decades in case of 11 analyzed countries made a period of conditional

Ta bl e 3 Fundamental macroeconomic data for episodes for fisca l conso l i dations -. _ - ---~ . _ - ---~ --_ . _ - -D. Ge r rn a ny Ireland Luxemburg Austria Portugal Fin l and Spain

2006

1996

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Thus, the analysis based on convergence framework can be interpreted as an argument supporting the thesis on the possibility of non-Keynesian effects in ease of signifieant fiscal consolidations. In the same tirne the analysis ean give some argument that the future deleverage process, whieh will be probably neeessary for keeping long term growth perspective in Europe, in ease of proper construction of eonsolidation programs does not have tobe a short term growth obstac1e. In spite of

its serious methodological drawback, the qualitative analysis showed that in case or .. ~;~,.;:;~_~~

the group of expansionary episodes the inereases of taxes and revenues were much .--~~~

lower than in ease of typie al Keynesian consolidations. This ean be a factor to eonsider in the eontext of plans for future effort to deleverage and stabilize fiscal systems of European Countries.

The next steps eoncerning future researeh in the field should be coverage of wider group of eountries such as examining whole eountries of current euro area and in the end all countries of European Union. The next stepsshould be also more detailed coneentration on the fiscal transitions rnechanism that aceompanied non-Keynesian and typical Keynesian consolidations in European Union.

494 A.P. Balcerzak et al. 2.00 l

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IIAnnual change of total expenditures (% ofGoP)during the episode

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non-Keynesian and Keynesian episodes of fiscal consolidations

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