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How big (small?) are fiscal multipliers?

Ilzetzki, Ethan, Mendoza, Enrique G. and Végh Gramont, Carlos A. (2011) How big (small?) are fiscal multipliers? Working Paper, 11/52. International Monetary Fund. ISBN 9781455218028

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Abstract

We contribute to the intense debate on the real effects of fiscal stimuli by showing that the impact of government expenditure shocks depends crucially on key country characteristics, such as the level of development, exchange rate regime, openness to trade, and public indebtedness. Based on a novel quarterly dataset of government expenditure in 44 countries, we find that (i) the output effect of an increase in government consumption is larger in industrial than in developing countries, (ii) the fisscal multiplier is relatively large in economies operating under predetermined exchange rate but zero in economies operating under flexible exchange rates; (iii) fiscal multipliers in open economies are lower than in closed economies and (iv) fiscal multipliers in high-debt countries are also zero.

Item Type: Monograph (Working Paper)
Official URL: http://www.imf.org
Additional Information: © 2011 International Monetary Fund
Library of Congress subject classification: H Social Sciences > HB Economic Theory
H Social Sciences > HJ Public Finance
Journal of Economic Literature Classification System: H - Public Economics > H3 - Fiscal Policies and Behavior of Economic Agents > H30 - General
H - Public Economics > H5 - National Government Expenditures and Related Policies > H50 - General
H - Public Economics > H6 - National Budget, Deficit, and Debt > H63 - Debt; Debt Management
Sets: Departments > Economics
Collections > Economists Online
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Identification Number: 11/52
Date Deposited: 20 Feb 2012 12:17
URL: http://eprints.lse.ac.uk/41945/

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