A fiscal adjustment is a reduction in the government primary budget deficit, and it can result from a reduction in government expenditures, an increase in tax revenues, or both simultaneously.
There is no a clear consensus about the definition of fiscal adjustment, but it is commonly understood as a process, instead of as a status: governments run fiscal deficits, fiscal surpluses or balanced budgets, and the process from a budget deficit to a sustained period of balanced budget is a fiscal adjustment.
There are two significant features in any fiscal adjustment: the duration of the process, usually measured in years, that defines the intensity of the effort; and the composition of the adjustment, measured as the proportion of the adjustment obtained from expenditure cuts compared to the proportion gained from tax increases.
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... research by economists at this institution, expenditure-based fiscal adjustments were more stable and durable than revenue-based strategies during the 1980s in Latin American and ... economist, Robert Mundell, who stated that "fiscal discipline is a learned behavior", there is no economic reason to tie the hands of politicians to tight constantly balanced ... the United States, Germany, France or Italy, carried out neo-Keynesian fiscal policies during the recession of 2002 ...
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