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Título:	When fiscal consolidation meets private deleveraging
Autor/a:	Andrés, Javier; Arce, Óscar; Thomas, Carlos
Abstract:	We analyze the interaction between fiscal consolidations and private sector deleveraging in an economy inside a monetary union. Pre-existing long-term collateralized private debt - a core ingredient of the deleveraging process - plays a critical role in shaping fiscal multipliers. By buffering the short-run fall in debtors´ spending capacity, long-run private debt reduces the shortrun multipliers of aggressive (large and/or fast) consolidations. However, absent credibility concerns, aggressive consolidations raise the intensity and length of private deleveraging, causing higher output losses over the medium-run. In terms of discounted output losses and welfare, this latter effect dominates, so that larger and faster consolidations are relatively costlier than smaller and more gradual ones. Also, in this environment, alternative budgetary instruments generate sizable differences in terms of their incidence on private deleveraging dynamics and, hence, on their overall output costs of fiscal consolidations.
Abstract:	The ADEMU Working Paper Series is being supported by the European Commission Horizon 2020 European Union funding for Research & Innovation, grant agreement No 649396.
Materia(s):	-Fiscal conditions -Long-term private debt -Financial shock
Derechos:	This is an Open Access article distributed under the terms of the Creative Commons Attribution License Creative Commons Attribution 4.0 International, which permits unrestricted use, distribution and reproduction in any medium provided that the original work is properlyattributed. http://creativecommons.org/licenses/by/4.0/
Tipo de documento:	Documento de trabajo
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