Quotation Burger, Anton, Zagler, Martin. 2008. US growth and budget consolidation in the 1990s: was there a non-Keynesian effect?. International Economics and Economic Policy 5 (1-2): 225-235.




The 1990s were an extraordinary period for the US economy, both because of declining budget deficits and emerging budget surpluses, as well as high rates of economic growth. This paper challenges the conventional wisdom that high growth rates caused budget improvements, and claims that budget consolidations also contributed to fostering economic growth. We propose the existence of a non-Keynesian effect, where fiscal policy runs counter to Keynesian theory and fiscal consolidation can foster economic growth. We present empirical evidence that an increase in tax revenues reduces the distortionary bias of future taxation and therefore leads to an increase in consumer confidence and consumption. Two supply side effects are proposed: a reduction in transfers reduced labour market pressures and government savings provided liquidity for financial markets, both of which increased incentives to invest.


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Publication's profile

Status of publication Published
Affiliation WU
Type of publication Journal article
Journal International Economics and Economic Policy
Language English
Title US growth and budget consolidation in the 1990s: was there a non-Keynesian effect?
Volume 5
Number 1-2
Year 2008
Page from 225
Page to 235
Reviewed? Y
URL http://www.springerlink.com/content/d141k43570gn4188/?p=9df2db9af4084970b3e053dc96e7f997&pi=11


Economic Growth and Fiscal Policy
Burger, Anton (Former researcher)
Zagler, Martin (Details)
Research Institute for International Taxation FI (Details)
Research Institute for Regulatory Economics FI (Details)
Department of Economics (Crespo Cuaresma) (Details)
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