TY - JOUR AU - Michail, Nektarios AU - Savva, Christos AU - Koursaros, Demetris PY - 2018/07/09 Y2 - 2024/03/29 TI - Effects of fiscal consolidation on business confidence in the Euro Area JF - Economics and Business Letters JA - Econ Bus Lett VL - 7 IS - 2 SE - Articles DO - 10.17811/ebl.7.2.2018.76-83 UR - https://reunido.uniovi.es/index.php/EBL/article/view/12649 SP - 76-83 AB - <p><span lang="EN-GB"><span style="font-size: medium;">We employ a factor-augmented VAR (FAVAR) covering both domestic and international developments to examine the confidence effects of a fiscal shock, using a sample of six euro area countries. The results indicate that following a shock in total government expenditure, responses are country-specific, while a weak geographical pattern, i.e. a distinction between core and periphery countries can be observed. Overall, the confidence response is short-lived and returns to zero after a few quarters. Heterogeneity in country responses also indicates that the Bachmann and Sims (2012) conclusion suggesting the endogenous response of confidence explaining almost all of the fiscal-driven output expansion in recessions, may hold only in country-specific cases.</span></span></p> ER -