Does Austerity Pay Off?

@article{Born2020DoesAP,
  title={Does Austerity Pay Off?},
  author={Benjamin Born and Gernot M{\"u}ller and Johannes Pfeifer},
  journal={Review of Economics and Statistics},
  year={2020},
  volume={102},
  pages={323-338}
}
Abstract We investigate empirically how fiscal shocks—unanticipated and exogenous changes of government consumption growth—affect the sovereign default premium. For this purpose, we assemble a new data set for 38 emerging and developed economies. It contains approximately 3,000 observations for the sovereign default premium and three alternative measures of fiscal shocks. We condition our estimates on whether shocks are positive or negative and initial conditions in terms of fiscal stress. An… 

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