Scandinavian Working Papers in Economics
Research Papers in Economics,
Stockholm University, Department of Economics
No 2013:11: Can fiscal austerity be expansionary in present Europe? The lessons from Sweden
Lennart Erixon ()
Additional contact information
Lennart Erixon: Dept. of Economics, Stockholm University, Postal: Department of Economics, Stockholm University, S-106 91 Stockholm, Sweden
Abstract: In the mid-1990s, a Social Democratic government pursued an ambitious fiscal austerity policy in Sweden in the aftermath of a deep recession and public budget crisis. Economic advisors were guided by the idea that fiscal austerity would have neutral or expansionary effects on output and employment. In order to avoid large public deficits in the future the government also introduced radical fiscal rules. The main conclusion in this article is that the fiscal austerity measures in the mid-1990s delayed the Swedish economic recovery and that neither these measures nor the fiscal rules were responsible for the impressive Swedish macroeconomic performance in the following period. The positive economic development in Sweden was driven by export, profit and technology, reflecting an international upswing and the country’s flexible exchange rates and industrial composition. Similar beneficial conditions for expansion are not present in the EMU countries suffering from a budget and debt crisis today.
Keywords: Fiscal austerity; Swedish stabilization policy; Swedish growth; fiscal rules
30 pages, September 4, 2013
Full text files
wp13_11.pdf
Questions (including download problems) about the papers in this series should be directed to Anne Jensen ()
Report other problems with accessing this service to Sune Karlsson ().
RePEc:hhs:sunrpe:2013_0011This page generated on 2024-09-13 22:17:19.