Senior Economist Mathias Klein

“The Political Costs of Austerity”

In this study, recently published in the Review of Economics and Statistics, Mathias Klein and his collaborators use a novel regional database covering over 200 elections in several European countries, thus providing new empirical evidence on the political consequences of fiscal consolidations. Fiscal consolidations lead to a significant increase in extreme parties’ vote share, lower voter turnout, and a rise in political fragmentation. The researchers highlight the close relationship between detrimental economic developments and voters’ support for extreme parties by showing that austerity induces severe economic costs through lowering GDP, employment, private investment, and wages.

Mr. Klein’s main research interests are macroeconomics and macroeconometrics with a particular focus on fiscal and monetary policy, private credit cycles, and financial frictions. He is currently working on how the financial cycle affects the monetary policy transmission mechanism. In another project, he is investigating whether fiscal policy is more effective in stimulating the economy in times when monetary policy is constrained by the zero lower bound on nominal interest rates. Furthermore, he is also studying whether the level of aggregate uncertainty impacts on how fiscal policy interventions transmit to the economy.

Mathias Klein is a Senior Economist at the Research Division of Sveriges Riksbank. He holds a doctoral degree from the Ruhr Graduate School in Economics and TU Dortmund University. After obtaining his PhD, he worked for three years as post-doctoral researcher at DIW Berlin. He also holds an MSc in Economics from the University of Leipzig.