IMF paper relates fiscal consolidation and growth

IMF headquarters in Washington, DC

A working paper, published by the International Monetary Fund in May, considers the relationship between fiscal policy and short- and long-run growth.

The authors, Carlo Cottarelli and Laura Jaramillo, say fiscal consolidation is likely to reduce short-run growth, but to increase growth in the long run.

They warn that "frontloaded adjustment could involve sizable output losses", instead suggesting a more gradual consolidation. To maintain credibility, countries "should define clear medium-term

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