IESET.
Hypotheses·fiscal·fiscal_consolidation_credibility_growth

Credible fiscal consolidation episodes — defined as sustained primary balance improvement of at least 2% of GDP over 3 years, not reversed within 5 years, and accompanied by declining debt-to-GDP trajectories — predict stronger subsequent 10-year real GDP per capita growth and private investment than repeated discretionary fiscal stimulus in mature economies, in an OECD panel 1980-2020.

The directional claim is that credible consolidators experience cumulative growth 5-15% above matched non-consolidating peers over the post-consolidation decade, while stimulus-reliant economies show no significant gain or a relative loss.

SUPPORTEDengine/runs/fiscal_consolidation_credibility_growth

supported

confidence cueThis is a clear pass for the claim as written. It still applies only to this sample, period, and method.

policy briefClear support

In ordinary language

In plain terms, this asks whether credible consolidation indicator is actually linked to better or worse real income per capita growth from 1980 to 2020.

plain answer

The data clearly moved in the predicted direction. supported

why it matters

This matters because fiscal claims should change belief only when they survive a pre-declared empirical test.

how the test works

It compares 35 country or place units from 1980 to 2020, using a synthetic control design.

what was measured
What changed
  • Credible consolidation indicator
  • Repeated stimulus indicator
Possible pathway
  • Sovereign bond yield spread
  • Business confidence index
What we checked
  • Real income per capita growth
  • Private investment share income
  • Long term interest rate
what this does not prove

A single test is not the whole truth. It narrows the claim under a specific sample, time period, and method. Strong policy conclusions need the pattern to survive nearby tests, alternative data, and serious objections.

verification

3 input datasets, 0 unresolved missing series, provenance status: reproducible hash verified.

Results

engine/runs/fiscal_consolidation_credibility_growth
1007550250198020002020AUSAUTBELCANCHECHLCZE
illustrative sketch · run pending
No coefficients yet. When the model fires, this chart will show real_gdp_per_capita_growth across 35 sampled countries over 1980–2020.
The shapes above are stylised — none of the lines are real data.
Placeholder for fiscal_consolidation_credibility_growth. Published chart will be generated from engine/runs/fiscal_consolidation_credibility_growth/chart_data.json.

Who has skin in the game — schools predicting on this

10 schools list this hypothesis as a test of their position. The chips below are school-level scoreboard outcomes, not a second hypothesis verdict.

hypothesis verdict vs scoreboard outcome

The banner verdict judges this hypothesis as written. The scoreboard asks whether each school's polarity-corrected prediction was right. Raw status is not a school win: SUPPORTED supports schools that needed SUPPORTED, but refutes schools that needed REFUTED.

Chicago School Monetarismwins if SUPPORTEDschool supportedClassical Liberalwins if SUPPORTEDschool supportedDegrowth / Ecological Macroeconomicswins if MIXEDpartial/no-callEco-Socialism / Red-Greenwins if MIXEDpartial/no-callEmpirical Pragmatist (the framework's house position)wins if SUPPORTEDschool supportedMarket Socialism (Lange-Lerner tradition)wins if MIXEDpartial/no-callMarxian Political Economywins if MIXEDpartial/no-callModern Monetary Theorywins if MIXEDpartial/no-callNew Keynesian (mainstream synthesis)wins if MIXEDpartial/no-callOrdoliberalism (Freiburg School)wins if SUPPORTEDschool supported

Pre-registration

pre-registered
first-spec commit 5ce4495 · 2026-05-02T19:11:20Z

Credible fiscal consolidation episodes — defined as sustained primary balance improvement of at least 2% of GDP over 3 years, not reversed within 5 years, and accompanied by declining debt-to-GDP trajectories — predict stronger subsequent 10-year real GDP per capita growth and private investment than repeated discretionary fiscal stimulus in mature economies, in an OECD panel 1980-2020. The directional claim is that credible consolidators experience cumulative growth 5-15% above matched non-consolidating peers over the post-consolidation decade, while stimulus-reliant economies show no significant gain or a relative loss.

Falsification criterion — what would disprove this

set before the run · honoured after

This hypothesis is considered falsified if:

SUPPORTED if the average synthetic-control gap for real GDP per capita growth is positive and significant (permutation p<0.10) over the 10-year post-consolidation window, AND the private-investment gap is also positive and significant. PARTIAL if growth gap is positive but investment gap is not (consumption-driven expansion). REFUTED if the growth gap is negative and significant at p<0.10. INFORMATIVE: excluding the 2010-2015 European austerity episodes should not eliminate the result; if it does, the finding is a post-GFC Eurozone story rather than a general consolidation effect.

formal test & threshold
test:      synthetic_control_credible_consolidation_vs_stimulus_growth_10yr
threshold: Synthetic-control ATT (GDP pc growth, 10yr) > 0 at permutation p<=0.10  AND Synthetic-control ATT (private investment, 10yr) > 0 at permutation p<=0.10  AND Ex-Eurozone-austerity robustness retains sign of both ATTs.

Method

Template
synthetic_control
Clustering
country
Sample
35 countries · 1980 – 2020
Evidence type
causal

Primary: synthetic control for each credible consolidation episode, matching on pre-consolidation GDP per capita, debt, investment, institutional quality, and unemployment over a 10-year donor window. Donor pool: mature OECD economies that did not consolidate in the same period. Secondary: Callaway-Sant'Anna staggered DiD with never-treated and not-yet-treated controls. Tertiary: local projections tracing dynamic response to consolidation initiation.

Data

VariableSourceTransform
real_gdp_per_capita_growth
outcome
world_bank_wdi:NY.GDP.PCAP.KDtier 2
annual_log_change
private_investment_share_gdp
outcome
world_bank_wdi:NE.GDI.FTOT.ZStier 2
level
long_term_interest_rate
outcome
imf:long_term_interest_ratetier 2
level
credible_consolidation_indicator
treatment
constructed:indicator = 1 during and 10 years after credible consolidation episodetier 5
indicator
repeated_stimulus_indicator
treatment
constructed:indicator = 1 for countries with >3 discretionary fiscal expansions (>1.5pp cyclically-adjusted primary balance deteriortier 5
indicator
sovereign_bond_yield_spread
channel
constructed:10yr government bond yield minus German bund (EU) or US Treasury (non-EU)tier 5
level
business_confidence_index
channel
oecd:business_confidencetier 2
level
initial_log_gdp_per_capita
control
world_bank_wdi:NY.GDP.PCAP.KDtier 2
log
institutional_quality
control
wgi:RL.ESTtier 4
level
trade_openness
control
world_bank_wdi:NE.TRD.GNFS.ZStier 2
level
initial_debt_to_gdp
control
imf:GGXWDG_NGDPtier 2
pre_episode_level
unemployment_rate
control
ilo:unemployment_ratetier 2
pre_episode_mean

● ready  · ● pending  · ● reconstruct-needed

Detailed result card

Result card — fiscal_consolidation_credibility_growth

Verdict: supported — High-credibility consolidators +2.76%/yr vs comparator median +1.78%/yr (diff +0.98pp, n=287).

Strongest opposing argument

Every hypothesis ships with its charitable opposing argument. The framework earns credibility by handling objections at their strongest, not weakest.

Notes

Data readiness: - IMF FAD / OECD Economic Outlook primary balance (ready) - Alesina-Ardagna consolidation dataset (ready) - WDI GDP pc, private investment (ready) - IMF WEO debt, long-term interest rate (ready) - WGI RL.EST (ready) - ILO unemployment (ready) - Sovereign bond yields (ready) - OECD BCI business confidence (pending)

Authored framework. Read the transparency note.