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How big (small?) are fiscal multipliers?

Ilzetzki, Ethan and Mendoza, Enrique G. and Végh, Carlos A. (2013) How big (small?) are fiscal multipliers? Journal of Monetary Economics, 60 (2). pp. 239-254. ISSN 0304-3932

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Identification Number: 10.1016/j.jmoneco.2012.10.011

Abstract

Contributing to the debate on the macroeconomic effects of fiscal stimuli, we show 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 fiscal multiplier is relatively large in economies operating under predetermined exchange rates but is zero in economies operating under flexible exchange rates; (iii) fiscal multipliers in open economies are smaller than in closed economies; (iv) fiscal multipliers in high-debt countries are negative.

Item Type: Article
Official URL: http://www.journals.elsevier.com/journal-of-moneta...
Additional Information: © 2013 Elsevier
Subjects: H Social Sciences > HB Economic Theory
H Social Sciences > HJ Public Finance
Sets: Departments > Economics
Collections > Economists Online
Date Deposited: 07 Nov 2012 15:09
Last Modified: 04 Jun 2014 15:19
URI: http://eprints.lse.ac.uk/id/eprint/46815

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