Download or read book Fiscal Policy Multipliers in Small States written by Ali Alichi and published by International Monetary Fund. This book was released on 2019-03-26 with total page 39 pages. Available in PDF, EPUB and Kindle. Book excerpt: Government debt in many small states has risen beyond sustainable levels and some governments are considering fiscal consolidation. This paper estimates fiscal policy multipliers for small states using two distinct models: an empirical forecast error model with data from 23 small states across the world; and a Dynamic Stochastic General Equilibrium (DSGE) model calibrated to a hypothetical small state’s economy. The results suggest that fiscal policy using government current primary spending is ineffective, but using government investment is very potent in small states in affecting the level of their GDP over the medium term. These results are robust to different model specifications and characteristics of small states. Inability to affect GDP using current primary spending could be frustrating for policymakers when an expansionary policy is needed, but encouraging at the current juncture when many governments are considering fiscal consolidation. For the short term, however, multipliers for government current primary spending are larger and affected by imports as share of GDP, level of government debt, and position of the economy in the business cycle, among other factors.
Download or read book How Big Small are Fiscal Multipliers written by Ethan Ilzetzki and published by International Monetary Fund. This book was released on 2011-03-01 with total page 68 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.
Download or read book The Effectiveness of Fiscal Policy in Stimulating Economic Activity written by Richard Hemming and published by International Monetary Fund. This book was released on 2002-12 with total page 62 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper reviews the theoretical and empirical literature on the effectiveness of fiscal policy. The focus is on the size of fiscal multipliers, and on the possibility that multipliers can turn negative (i.e., that fiscal contractions can be expansionary). The paper concludes that fiscal multipliers are overwhelmingly positive but small. However, there is some evidence of negative fiscal multipliers.
Download or read book Fiscal Policy Multipliers in Small States written by Ali Alichi and published by International Monetary Fund. This book was released on 2019-03-26 with total page 39 pages. Available in PDF, EPUB and Kindle. Book excerpt: Government debt in many small states has risen beyond sustainable levels and some governments are considering fiscal consolidation. This paper estimates fiscal policy multipliers for small states using two distinct models: an empirical forecast error model with data from 23 small states across the world; and a Dynamic Stochastic General Equilibrium (DSGE) model calibrated to a hypothetical small state’s economy. The results suggest that fiscal policy using government current primary spending is ineffective, but using government investment is very potent in small states in affecting the level of their GDP over the medium term. These results are robust to different model specifications and characteristics of small states. Inability to affect GDP using current primary spending could be frustrating for policymakers when an expansionary policy is needed, but encouraging at the current juncture when many governments are considering fiscal consolidation. For the short term, however, multipliers for government current primary spending are larger and affected by imports as share of GDP, level of government debt, and position of the economy in the business cycle, among other factors.
Download or read book Getting Into the Nitty Gritty of Fiscal Multipliers Small Details Big Impacts written by José Federico Geli and published by International Monetary Fund. This book was released on 2023-02-10 with total page 50 pages. Available in PDF, EPUB and Kindle. Book excerpt: Despite the remarkable progress the literature has made throughout the past years in studying fiscal multipliers, estimates still vary considerably across studies. Partly, estimates differ because of context-specific variables that affect multipliers, but also because of the lack of a standardized framework to calculate and report them, making comparisons among studies hard to make. In this paper, we use a large panel of countries to study how some important methodological details affect the empirical estimates. Focusing on emerging economies, we show how slight changes in the filtering approach of fiscal forecast errors or the accumulation procedure of responses can significantly impact estimates. We emphasize that one of the most important features of estimating multipliers is the endogenous dynamic responses of fiscal variables to fiscal shocks, and therefore we argue against reporting multipliers as simply the output response to exogenous fiscal innovations. Although our baseline results are in line with the previous studies, our standardized framework allow us to make fairer comparisons of multiplier estimates across budgetary items and country income groups.
Download or read book Fiscal Policy after the Financial Crisis written by Alberto Alesina and published by University of Chicago Press. This book was released on 2013-06-25 with total page 596 pages. Available in PDF, EPUB and Kindle. Book excerpt: The recent recession has brought fiscal policy back to the forefront, with economists and policy makers struggling to reach a consensus on highly political issues like tax rates and government spending. At the heart of the debate are fiscal multipliers, whose size and sensitivity determine the power of such policies to influence economic growth. Fiscal Policy after the Financial Crisis focuses on the effects of fiscal stimuli and increased government spending, with contributions that consider the measurement of the multiplier effect and its size. In the face of uncertainty over the sustainability of recent economic policies, further contributions to this volume discuss the merits of alternate means of debt reduction through decreased government spending or increased taxes. A final section examines how the short-term political forces driving fiscal policy might be balanced with aspects of the long-term planning governing monetary policy. A direct intervention in timely debates, Fiscal Policy after the Financial Crisis offers invaluable insights about various responses to the recent financial crisis.
Download or read book State Dependence of Fiscal Multipliers written by Mishel Ghassibe and published by . This book was released on 2022 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book What Have We Learned written by George A. Akerlof and published by MIT Press. This book was released on 2016-09-02 with total page 369 pages. Available in PDF, EPUB and Kindle. Book excerpt: Top economists consider how to conduct policy in a world where previous beliefs have been shattered by the recent financial and economic crises. Since 2008, economic policymakers and researchers have occupied a brave new economic world. Previous consensuses have been upended, former assumptions have been cast into doubt, and new approaches have yet to stand the test of time. Policymakers have been forced to improvise and researchers to rethink basic theory. George Akerlof, Nobel Laureate and one of this volume's editors, compares the crisis to a cat stuck in a tree, afraid to move. In April 2013, the International Monetary Fund brought together leading economists and economic policymakers to discuss the slowly emerging contours of the macroeconomic future. This book offers their combined insights. The editors and contributors—who include the Nobel Laureate and bestselling author Joseph Stiglitz, Federal Reserve Vice Chair Janet Yellen, and the former Governor of the Bank of Israel Stanley Fischer—consider the lessons learned from the crisis and its aftermath. They discuss, among other things, post-crisis questions about the traditional policy focus on inflation; macroprudential tools (which focus on the stability of the entire financial system rather than of individual firms) and their effectiveness; fiscal stimulus, public debt, and fiscal consolidation; and exchange rate arrangements.
Download or read book Building Back Better How Big Are Green Spending Multipliers written by International Monetary Fund and published by International Monetary Fund. This book was released on 2021-03-19 with total page 47 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper provides estimates of output multipliers for spending in clean energy and biodiversity conservation, as well as for spending on non-ecofriendly energy and land use activities. Using a new international dataset, we find that every dollar spent on key carbon-neutral or carbon-sink activities can generate more than a dollar’s worth of economic activity. Although not all green and non-ecofriendly expenditures in the dataset are strictly comparable due to data limitations, estimated multipliers associated with spending on renewable and fossil fuel energy investment are comparable, and the former (1.1-1.5) are larger than the latter (0.5-0.6) with over 90 percent probability. These findings survive several robustness checks and lend support to bottom-up analyses arguing that stabilizing climate and reversing biodiversity loss are not at odds with continuing economic advances.
Download or read book New Evidence on State Fiscal Multipliers written by Timothy J. Bartik and published by . This book was released on 2017 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt: When state and local governments engage in balanced budget changes in taxes and spending, what fiscal multiplier effects do such policies have on creating local jobs? Traditionally, the view has been that possible job-creation effects of such state and local “demand-side” policies are smaller, secondorder effects. Such effects might be worthwhile to take into consideration when a state or local government balances its budget during a recession, but the effects were believed to be of modest magnitude, and not of major importance for more general state and local public policies. However, recent estimates of fiscal multiplier effects of state and local spending and tax policies suggest much larger demand-side effects of such policies on local jobs. These fiscal multiplier effects are large enough to suggest relatively low costs per job created of some tax and spending policy combinations, sufficient to alter the net benefits of many public policies. In particular, this recent research suggests that policies that use tax increases on the top 10 percent of the income distribution to finance either public spending expansions or tax relief for the bottom 90 percent of the income distribution may offer some job creation benefits that are large enough to alter state and local policy decisions. Furthermore, the cost per job created of state business tax incentive policies or business tax cuts may be significantly altered after taking into account the opportunity costs of financing such policies by cutting public spending or raising taxes on the bottom 90 percent.
Download or read book Growth Forecast Errors and Fiscal Multipliers written by Mr.Olivier J. Blanchard and published by International Monetary Fund. This book was released on 2013-01-03 with total page 43 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper investigates the relation between growth forecast errors and planned fiscal consolidation during the crisis. We find that, in advanced economies, stronger planned fiscal consolidation has been associated with lower growth than expected, with the relation being particularly strong, both statistically and economically, early in the crisis. A natural interpretation is that fiscal multipliers were substantially higher than implicitly assumed by forecasters. The weaker relation in more recent years may reflect in part learning by forecasters and in part smaller multipliers than in the early years of the crisis.
Download or read book The Government Spending Multiplier at the Zero Lower Bound written by Mario Di Serio and published by . This book was released on 2020 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We estimate state-dependent government spending multipliers for the United States. We use a Factor-Augmented Interacted Vector Autoregression (FAIVAR) model. This allows us to capture the time-varying monetary policy characteristics including the recent zero interest rate lower bound (ZLB) state, to account for the state of the business cycle, and to address the limited information problem typically inherent in VARs. We identify government spending shocks by sign restrictions and use a government spending growth forecast series to account for the effects of anticipated fiscal policy. In our baseline specification, we find that government spending multipliers in a recession range from 3:56 to 3:79 at the ZLB. Away from the ZLB, multipliers in recessions range from 2:31 to 3:05. Several robustness analyses confirm that multipliers are higher, when the interest rate is lower and that multipliers in recessions exceed multipliers in expansions. Our results are consistent with theories that predict larger multipliers at the ZLB.
Download or read book New Evidence on State Fiscal Multipliers written by Timothy J. Bartik and published by . This book was released on 2017 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt: When state and local governments engage in balanced budget changes in taxes and spending, what fiscal multiplier effects do such policies have on creating local jobs? Traditionally, the view has been that possible job-creation effects of such state and local “demand-side” policies are smaller, secondorder effects. Such effects might be worthwhile to take into consideration when a state or local government balances its budget during a recession, but the effects were believed to be of modest magnitude, and not of major importance for more general state and local public policies. However, recent estimates of fiscal multiplier effects of state and local spending and tax policies suggest much larger demand-side effects of such policies on local jobs. These fiscal multiplier effects are large enough to suggest relatively low costs per job created of some tax and spending policy combinations, sufficient to alter the net benefits of many public policies. In particular, this recent research suggests that policies that use tax increases on the top 10 percent of the income distribution to finance either public spending expansions or tax relief for the bottom 90 percent of the income distribution may offer some job creation benefits that are large enough to alter state and local policy decisions. Furthermore, the cost per job created of state business tax incentive policies or business tax cuts may be significantly altered after taking into account the opportunity costs of financing such policies by cutting public spending or raising taxes on the bottom 90 percent.
Download or read book Asia and Pacific Small States Monitor August 2014 written by Ms.Shari Boyce and published by International Monetary Fund. This book was released on 2014-08-01 with total page 14 pages. Available in PDF, EPUB and Kindle. Book excerpt: This issue of the Asia & Pacific Small States Monitor focuses on the challenges facing Asia and Pacific small states associated with natural disasters and climate change. Most tourism-oriented economies experienced a robust increase in arrivals, partly reflecting country-specific factors. Among commodity exporters (Bhutan, Solomon Islands, and Timor-Leste) and other Asia and Pacific small states, growth remains uneven: robust activity in Bhutan was driven mainly by hydropower-related construction activities; Solomon Islands experienced a continuing decline of logging stocks and a short-term disruption of gold production; and Timor-Leste’s ongoing depletion of oil reserves has led to a tighter budget constraint and lower government spending in the non-oil sector.
Download or read book Government Spending Effects in Low income Countries written by Ms.Wenyi Shen and published by International Monetary Fund. This book was released on 2015-12-30 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt: Despite the voluminous literature on fiscal policy, very few papers focus on low-income countries (LICs). This paper develops a new-Keynesian small open economy model to show, analytically and through simulations, that some of the prevalent features of LICs—different types of financing including aid, the marginal efficiency of public investment, and the degree of home bias—play a key role in determining the effects of fiscal policy and related multipliers in these countries. External financing like aid increases the resource envelope of the economy, mitigating the private sector crowding out effects of government spending and pushing up the output multiplier. The same external financing, however, tends to appreciate the real exchange rate and as a result, traded output can respond quite negatively, reducing the overall output multiplier. Although capital scarcity implies high returns to public capital in LICs, declines in public investment efficiency can substantially dampen the output multiplier. Since LICs often import substantial amounts of goods, public investment may not be as effective in stimulating domestic production in the short run.
Download or read book Fiscal Multipliers in the ECCU written by Mr.Jesus Gonzalez-Garcia and published by International Monetary Fund. This book was released on 2013-05-22 with total page 17 pages. Available in PDF, EPUB and Kindle. Book excerpt: The multipliers of taxes, and government consumption and investment expenditure for the Eastern Caribbean Currency Union (ECCU) are estimated using vector autoregression models with panel data. The impact and long-run multipliers are below unity, suggesting that a great extent of the intended impulse ends up expanding imported demand. The long-run multipliers of taxes and consumption expenditure are non-different from zero statistically, while public investment has a long-run multiplier of 0.6. The results suggest that countercyclical policies to stimulate growth should focus on public investment.
Download or read book Strengthening Fiscal Frameworks and Improving the Spending Mix in Small States written by Ezequiel Cabezon and published by . This book was released on 2015 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt: Reflecting diseconomies of scale in providing public goods and services, recurrent spending in small states typically represents a large share of GDP. For some small states, this limits the fiscal space available for growth-promoting capital spending. Small states generally face greater revenue volatility than other country groups, owing to their exposure to exogenous shocks (including natural disasters) and narrow production bases. With limited buffers, revenue volatility often results in procyclical fiscal policy as the econometric analysis shows. To strengthen fiscal frameworks, small states should seek to streamline and prioritize recurrent spending to create fiscal space for capital spending. The quality of spending could also be improved through public financial management reform and multiyear budgeting. --Abstract.
