European Austerity Discourse: Is Too Much Saving Bound to Backfire?

Tasks

For some time now, there has been growing criticism in Europe of a supposedly overly restrictive austerity policy. The lack of clarity on how to define and measure austerity, however, leads to contradictory results and different economic policy implications in both political discussions and economic studies. This project describes the ambiguity of the term "austerity" in economic studies and is intended to contribute to a more objective communication of the actual economic situation in the euro area. Two basic questions are examined: research question (1) ("Austerity in politics, the media and the population") examines (historical) trends in the relevance of the topic in the media and the political discussion, and analyses the attitude of the population towards austerity policies. Research question (2) ("Austerity in Economics") analyses patterns in the definition, use and statistical measurement of austerity in economics studies.

Methods

The project examines digitized books, articles in the Frankfurter Allgemeine Zeitung and speeches in the European Parliament and aims to identify patterns in the use of the term "austerity". More specifically, all articles published in the top- 400 economic journals are analysed in detail. The usage of “austerity” in literature on this topic is compared with the related (but less ideologically-connoted) term “fiscal consolidation”. The methods and indicators used to classify austerity are discussed and the respective problems are identified. Based on these measurements, periods of austerity are illustrated in developed economies, and the implications of different indicators are compared. This comparison documents the ambiguity and vagueness in the classification of austerity.

Data and other sources

Digitized books (Michel et al., 2011), speeches in the European Parliament (Hoyland et al., 2009), articles in Top-400 journals (RePEc and respective journals), data on the austerity measures of Alesina and Ardagna (2010), Guajardo et al. (2014), Jorda and Taylor (2016), Yang et al. (2015), OECD (2018), World Bank (2018), and Eurostat (2018).

Results

The study examines the use and meaning of the term "austerity" in public and academic debate. Usage of "austerity" has risen sharply since the financial crisis, but there is no consensus on its substantive meaning. Scientifically, the term is used primarily in heterodox journals. Since there is no universal definition of the term "austerity," empirical measures used to classify periods of austerity differ widely. This ambiguity is reflected in empirical studies which, depending on the measure used, show positive or negative real economic impulses triggered by austerity policies.

Press echo (in German)

Was heißt "Austerität"? Wissenschaftlich ist der Begriff nicht eindeutig definiert
Frankfurter Allgemeine Zeitung, 18.01.2019