The Open UniversitySkip to content
 

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.

Full text available as:
[img]
Preview
PDF (Accepted Manuscript) - Requires a PDF viewer such as GSview, Xpdf or Adobe Acrobat Reader
Download (1MB) | Preview
DOI (Digital Object Identifier) Link: https://doi.org/10.1080/01603477.2018.1431789
Google Scholar: Look up in Google Scholar

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: Journal Item
Copyright Holders: 2018 Taylor & Francis Group, LLC
ISSN: 1557-7821
Keywords: Expansionary austerity theory; fiscal policy; post-Keynesian macro models
Academic Unit/School: Faculty of Business and Law (FBL) > Business > Department for Accounting and Finance
Faculty of Business and Law (FBL) > Business
Faculty of Business and Law (FBL)
Item ID: 52370
Depositing User: Daniele Tori
Date Deposited: 17 Nov 2017 15:49
Last Modified: 10 Nov 2019 14:37
URI: http://oro.open.ac.uk/id/eprint/52370
Share this page:

Metrics

Altmetrics from Altmetric

Citations from Dimensions

Download history for this item

These details should be considered as only a guide to the number of downloads performed manually. Algorithmic methods have been applied in an attempt to remove automated downloads from the displayed statistics but no guarantee can be made as to the accuracy of the figures.

Actions (login may be required)

Policies | Disclaimer

© The Open University   contact the OU