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Uncovering time variation in public expenditure multipliers: new evidence

Sachdeva, Paras, Ahmad, Wasim and Bhanumurthy, N. R. (2023) Uncovering time variation in public expenditure multipliers: new evidence. Indian Economic Review, 58. 445 - 483. ISSN 0019-4670

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Identification Number: 10.1007/s41775-023-00175-y

Abstract

The paper provides fresh evidence on the dynamics of public expenditure multipliers and the factors explaining them. The findings of this paper may facilitate the policymakers in effectively framing fiscal policy to expedite economic stabilisation and uplift economic growth. The paper proceeds with computing the time-varying public expenditure multipliers by employing the time-varying parameter–vector autoregressive (TVP–VAR) model on the Indian quarterly data set between 1997Q1 and 2019Q4. It then examines the role of structural factors in explaining the time variation in public expenditure multipliers. The empirical investigation reveals the heterogeneity in time-varying transmission and effectiveness of revenue capital and total expenditure shocks. The study further finds the adverse effects of fiscal instability and trade openness on public expenditure multipliers. The financial development and propensity to consume augment the public expenditure multiplier values. The findings also provide insights into the periodic impact of expenditure multipliers, which is relevant for policymakers.

Item Type: Article
Official URL: https://www.springer.com/journal/41775
Additional Information: © 2023, The Author(s) under exclusive licence to Editorial Office, Indian Economic Review.
Divisions: International Inequalities Institute
Subjects: H Social Sciences > HB Economic Theory
H Social Sciences > HG Finance
Date Deposited: 05 Jun 2023 14:30
Last Modified: 23 Jun 2024 18:15
URI: http://eprints.lse.ac.uk/id/eprint/119339

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