Skip navigation

The theoretical and empirical fragilities of the expansionary austerity theory

The theoretical and empirical fragilities of the expansionary austerity theory

Botta, Alberto and Tori, Daniele (2018) The theoretical and empirical fragilities of the expansionary austerity theory. Journal of Post Keynesian Economics, 41 (3). pp. 364-398. ISSN 0160-3477 (Print), 1557-7821 (Online) (doi:https://doi.org/10.1080/01603477.2018.1431789)

[img] PDF (Author Accepted Manuscript)
18400 BOTTA_Theoretical_and_Empirical_Fragilities_2017.pdf - Accepted Version
Restricted to Repository staff only until 11 November 2019.

Download (13MB) | Request a copy

Abstract

Criticism to expansionary austerity theory has extensively addressed the methodological problems affecting the econometric techniques that underpin it; however, few efforts have formally analysed its theoretical strictures. In this paper we develop a more general and comprehensive critique, both from a theoretical and from an empirical perspective. We first present a short-run model that formally describes the theoretical background of specific policy measures advocated by expansionary austerity supporters. We show how these measures might only have expansionary outcomes under extreme and unrealistic conditions. We then move to the data, and provide an econometric analysis of the key variables that leave the results of our theoretical model undetermined; our findings reinforce the validity of our theoretical critique. Since 2007, when an important opportunity to test expansionary austerity presented itself with the recession, the core mechanisms of expansionary austerity theory seem to not have been working, to say the least. In fact, austerity measures delivered perverse results precisely in the countries where they were expected to be most effective.

Item Type: Article
Uncontrolled Keywords: Fiscal policy, expansionary austerity theory, post-Keynesian macro models
Subjects: H Social Sciences > HB Economic Theory
Faculty / Department / Research Group: Faculty of Business
Faculty of Business > Department of International Business & Economics
Last Modified: 11 May 2019 09:23
Selected for GREAT 2016: None
Selected for GREAT 2017: None
Selected for GREAT 2018: GREAT c
Selected for GREAT 2019: GREAT 5
URI: http://gala.gre.ac.uk/id/eprint/18400

Actions (login required)

View Item View Item

Downloads

Downloads per month over past year

View more statistics