The expansionary fiscal contraction (EFC) hypothesis states that fiscal austerity can increase output or consumption when a country is under heavy debt burdens because it sends positive signal about the country's solvency situation and long-term economic wellbeing. Empirical tests of this hypothesis have suffered from identification concerns due to data sources and empirical methodology. Using a sample of OECD countries between 1978 and 2014, this...
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Citation
Nie,Ou.
Expansionary Fiscal Austerity: New International Evidence (English). Policy Research working paper|no. WPS 9344 Washington, D.C. : World Bank Group. http://documents.worldbank.org/curated/en/430691596113581519