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Ideologically-charged Terminology
Scholars have been active in investigating causes and consequences of austerity policies. We examine how economists use the term "austerity" in scientific studies and measure austerity in empirical analyses. The sample includes around 3,500 journal articles published in the top 400 journals (RePEc ranking) over the period 1990-2018. The results show that the term austerity is often used in heterodox journals. Papers published in mainstream journals use the term "fiscal consolidation" instead. The term austerity is ambiguous: scholars use manifold definitions of austerity and the empirical measures identify different country-year observations as periods of austerity. We employ panel data for 34 OECD countries over the period 1960-2014 and examine how austerity is associated with economic growth. The results show that depending on how austerity is measured, inferences change. Strategic selection of austerity measures allows scholars to arrive at any desired results about the economic effects of austerity periods.
How to Handle the Fiscal Crisis in Greece?
We asked economic experts polled by the CESifo World Economic Survey how to handle the fiscal crisis in Greece in the year 2015. The sample includes about 850 experts from 110 countries. We find systematic differences in experts' recommendations. Our results suggest that policy advice is related to an expert's personal and country-level attributes. Country-level characteristics, especially credit default swaps as a measure of fiscal stability, predict views on whether Greece should exit the eurozone. An expert's educational background, age and professional affiliation predict opinions on the credit programs of the International Monetary Fund. We propose that policymakers who seek balanced policy advice should consult experts from different countries and personal backgrounds.
How to Handle the Crisis in Greece? Empirical Evidence Based on a Survey of Economics Experts
We asked experts from 113 countries polled by the CESifo World Economic Survey for their opinions on how to handle the crisis in Greece. 61.9% of the experts surveyed were not in favour of Greece exiting the Eurozone in the course of the negotiations held in June and July 2015. However, experts in countries such as Germany, the United Kingdom, Sweden, the Czech Republic, Denmark, and Slovakia were in favour of Greece exiting the Eurozone. The share of experts who were in favour of Greece staying in the Eurozone increased to 69.8% in October 2015. 72.4% of experts surveyed believed that the IMF should provide credit to Greece and 83.6% stated that the IMF should engage in economic reform programmes. Econometric evidence shows that experts from those Eurozone countries with high public debt-to-GDP-ratios were less likely to support the Grexit: when the debt-to-GDP-ratio increased by one percentage point, the likelihood of survey participants favouring the Grexit decreased by around 0.35 percentage points. Support for IMF reforms, by contrast, proved far less controversial.
Political Shocks and Inflation Expectations
How do global political shocks influence individuals' expectations about economic outcomes? We run a unique survey on inflation expectations among 145 tenured economics professors in Germany and exploit the 2022 Russian invasion in Ukraine as a natural experiment to identify the effect of a global political shock on expectations about national inflation rates. We find that the Russian invasion increased short-run inflation expectations for 2022 by 0.75 percentage points. Treatment effects are smaller regarding mid-term expectations for 2023 (0.47 percentage points) and are close to zero for longer periods. Text analysis of open questions shows that experts increase their inflation expectations because they expect supply-side effects to become increasingly important after the invasion. Moreover, experts in the treatment group are less likely to favour an immediate reaction of monetary policy to the increased inflation, which gives further evidence of the shock being interpreted primarily as a supply-side shock.
Fiscal Performance of Minority Governments
I use new data on central and general governments for 23 OECD countries over the period 1960-2015 (unbalanced panel) to examine fiscal performance under minority governments. The results do not suggest that minority governments had higher fiscal deficits and public expenditure than majority governments - corroborating many previous studies. An innovation of my study is to examine fiscal policies of minority governments that enjoy organized support of opposition parties. The results do not show that minority governments that enjoy organized support of opposition parties increased public expenditure to a larger extent than majority governments. If anything, fiscal deficits were somewhat higher under single-party minority governments with organized support of opposition parties than under majority governments especially. Minority and majority governments had quite similar fiscal performance in OECD countries.
Political Leaders and Macroeconomic Expectations
Can one single political leader influence macroeconomic expectations on a global scale? We design a large-scale survey experiment among influential economic experts working in more than 100 countries and use the 2020 US presidential election as a quasi-natural experiment to identify the effect of the US incumbent change on global macroeconomic expectations. We find large effects of Joe Biden's election on growth expectations of international experts, working through more positive expectations about trade. The electoral outcome particularly affected the expectations of Western allies and increased global economic uncertainty. Our findings suggest important political spillover effects in the formation of macroeconomic expectations.
