Using the IMF’s “action-based” dataset, we show that budgetary consolidation under both the euro and other exchange rate regimes negatively affects GDP growth, while it raises unemployment. However, these effects are more pronounced under the euro.

We show how to assess identifying assumptions for a low-frequency SVAR using estimates from a higher-frequency model. In our application quarterly data support identified annual SVARs in government spending and output by assuming zero within-year impact of output on spending.