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Effects of Fiscal Stimulus in Structural Models

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Author Info

  • G�nter Coenen
  • Christopher J. Erceg
  • Charles Freedman
  • Davide Furceri
  • Michael Kumhof
  • Ren� Lalonde
  • Douglas Laxton
  • Jesper Lind�
  • Annabelle Mourougane
  • Dirk Muir
  • Susanna Mursula
  • Carlos de Resende
  • John Roberts
  • Werner Roeger
  • Stephen Snudden
  • Mathias Trabandt
  • Jan in't Veld

Abstract

The paper subjects seven structural DSGE models, all used heavily by policymaking institutions, to discretionary fiscal stimulus shocks using seven different fiscal instruments, and compares the results to those of two prominent academic DSGE models. There is considerable agreement across models on both the absolute and relative sizes of different types of fiscal multipliers. The size of many multipliers is large, particularly for spending and targeted transfers. Fiscal policy is most effective if it has moderate persistence and if monetary policy is accommodative. Permanently higher spending or deficits imply significantly lower initial multipliers. (JEL E12, E13, E52, E62)

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/mac.4.1.22
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File URL: http://www.aeaweb.org/aej/mac/app/2010-0090_app.pdf
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Bibliographic Info

Article provided by American Economic Association in its journal American Economic Journal: Macroeconomics.

Volume (Year): 4 (2012)
Issue (Month): 1 (January)
Pages: 22-68

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Handle: RePEc:aea:aejmac:v:4:y:2012:i:1:p:22-68

Note: DOI: 10.1257/mac.4.1.22
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References

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  1. Michael Kumhof & Douglas Laxton, 2009. "Fiscal Deficits and Current Account Deficits," IMF Working Papers 09/237, International Monetary Fund.
  2. Ratto, Marco & Roeger, Werner & Veld, Jan in 't, 2009. "QUEST III: An estimated open-economy DSGE model of the euro area with fiscal and monetary policy," Economic Modelling, Elsevier, vol. 26(1), pages 222-233, January.
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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. A review of the recent literature on fiscal multipliers: size matters!
    by laurence-df in OFCE le blog on 2012-11-21 07:03:54
  2. Une revue récente de la littérature sur les multiplicateurs budgétaires : la taille compte !
    by laurence-df in OFCE le blog on 2012-11-21 07:02:59
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