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Global effects of fiscal stimulus during the crisis

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Author Info

  • Freedman, Charles
  • Kumhof, Michael
  • Laxton, Douglas
  • Muir, Dirk
  • Mursula, Susanna

Abstract

The IMF's Global Integrated Monetary and Fiscal Model is used to compute short-run multipliers of fiscal stimulus measures and long-run crowding-out effects of higher debt. Multipliers of two-year stimulus range from 0.2 to 2.2 depending on the fiscal instrument, the extent of monetary accommodation and the presence of a financial accelerator mechanism. A permanent 10 percentage point increase in the US debt to GDP ratio raises the US tax burden and world real interest rates in the long run, thereby reducing US and rest of the world output by 0.3-0.6 percent and 0.2-0.3 percent, respectively.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Monetary Economics.

Volume (Year): 57 (2010)
Issue (Month): 5 (July)
Pages: 506-526

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Handle: RePEc:eee:moneco:v:57:y:2010:i:5:p:506-526

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Web page: http://www.elsevier.com/locate/inca/505566

Related research

Keywords: Fiscal stimulus Crowding-out Financial crisis Non-Ricardian households Government deficits Government debt Macro-financial linkages;

References

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Citations

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Cited by:
  1. Cwik, Tobias & Mueller, Gernot & Schmidt, Sebastian & Wieland, Volker & Wolters, Maik H, 2012. "A New Comparative Approach to Macroeconomic Modeling and Policy Analysis," CEPR Discussion Papers 8814, C.E.P.R. Discussion Papers.
  2. Benjamin Carton, 2012. "Monetary-Policy Tradeoff in Overlapping Generations DSGE Models," DEM Working Papers Series 028, University of Pavia, Department of Economics and Management.
  3. Bennett T. McCallum, 2011. "Should Central Banks Raise their Inflation Targets? Some Relevant Issues," NBER Working Papers 17005, National Bureau of Economic Research, Inc.
  4. Tobias Cwik & Volker Wieland, 2010. "Keynesian government spending multipliers and spillovers in the euro area," Working Paper Series 1267, European Central Bank.
  5. Bruno Coric, 2011. "The financial accelerator effect: concept and challenges," Financial Theory and Practice, Institute of Public Finance, vol. 35(2), pages 171-196.
  6. G�nter Coenen & Christopher J. Erceg & Charles Freedman & Davide Furceri & Michael Kumhof & Ren� Lalonde & Douglas Laxton & Jesper Lind� & Annabelle Mourougane & Dirk Muir & Susanna Mursula & Ca, 2012. "Effects of Fiscal Stimulus in Structural Models," American Economic Journal: Macroeconomics, American Economic Association, vol. 4(1), pages 22-68, January.
  7. Vladimir Klyuev & Stephen Snudden, 2011. "Effects of Fiscal Consolidation in the Czech Republic," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 61(4), pages 306-326, August.
  8. Slim Bridji and Matthieu Charpe, 2012. "Labour Market and Fiscal Policy," IHEID Working Papers 03-2012, Economics Section, The Graduate Institute of International Studies, revised 16 Feb 2012.

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