Zaur Heydarov

Fiscal Consolidation and Growth in the Eurozone: Effects of Austerity Measures on Growth and Employment in the Eurozone Zaur Heydarov

This study investigates the short-run impact of fiscal consolidation on economic growth in Eurozone since Global Financial Crisis. The paper exclusively focuses on the effects of fiscal policy on economic growth in the short-run without covering the long term relationship since there is a general consensus that fiscal consolidation has direct and indirect positive effects on growth. We find negative short-run correlation between fiscal consolidation and growth in the Eurozone. Fiscal consolidation during a fragile economic recovery will dampen aggregate demand and increase unemployment in the short-run.