The phrase "a fiscal contraction of" is correct and usable in written English.
It can be used in discussions related to economics, particularly when referring to a reduction in government spending or economic activity.
Example: "The country experienced a fiscal contraction of 2% last year, leading to a decrease in public services."
Alternatives: "a reduction in fiscal policy" or "a decrease in government spending".
However one feels about the cuts themselves, the default path for fiscal policy is a fiscal contraction of 2.5% heading into 2011, and that would represent a serious headwind for the economy.
This implies a fiscal contraction of about 2% of GDP.
In other words, it looks at intent and action rather than outcomes.Austerity costedUsing this method, the IMF reckons that on average a rich country attempted a fiscal contraction of more than 1.5% of GDP about once a decade.
In such cases a fiscal contraction of 1% of GDP is more damaging to growth, knocking about 1% off output in the following year, according to the IMF's researchers.This lack of leeway is a real constraint on recovery.
Thanks to the expiry of a payroll-tax credit and extended jobless benefits in December, the United States is on course for a fiscal contraction of some 2% of GDP next year, the biggest of any large economy and enough to drag a weak economy into recession.The debt deal, which implies only modest new spending cuts in the short term, is not directly responsible for this.
Only the most bloodletting austericons could stomach a fiscal contraction of that magnitude at that point in the cycle.
In fact, they reckon that a fiscal contraction worth 1% of GDP typically cuts output by about 0.5% after two years.
If, in addition, everyone else is cutting, the effect of a fiscal contraction is further magnified.
"In response to the positive growth and re-inflation that occurred after devaluation and suspension of gold convertibility, the Fed raised reserve requirements, the Treasury sterilised gold inflows, and there was a fiscal contraction.
The Autumn Statement due on the 25th of this month is very likely to be based on an optimistic view that the economy will continue to grow strongly and can absorb a period of fiscal contraction – of 5 per cent of GDP in four years – considerably more severe than actually achieved in the Coalition years.
CBO calculates that even if Congress had repealed all of the Bush tax cuts, causing a massive fiscal contraction, "The pace of economic expansion will average 4.3percentt from 2014 through 2017," and unemployment will fall to 5.7percentt by 2017.
