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Fiscal Multiplier in Microstates: Evidence from the Caribbean

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  • Kester Guy
  • Anton Belgrave

Abstract

The global financial crisis and the attendant Great Recession of 2007–2009 have spawned a full-scale re-examination on the effectiveness of fiscal policy throughout the world. While this has led to a plethora of analyses in developed countries, the same abundance of the work has not been evident for developing counties. This paper uses time-series analysis to examine the multiplier impact of fiscal policy on growth and other macroeconomic variables in the case of four Caribbean states. Although these countries have similar degrees of openness, they differ in debt burdens and economic structures, thus providing a natural laboratory for this investigation. We concluded that fiscal multipliers among the sample countries are quite low and that the contemporaneous fiscal stance appears to be pro-cyclical. Copyright International Atlantic Economic Society 2012

Suggested Citation

  • Kester Guy & Anton Belgrave, 2012. "Fiscal Multiplier in Microstates: Evidence from the Caribbean," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 18(1), pages 74-86, February.
    • Handle: RePEc:kap:iaecre:v:18:y:2012:i:1:p:74-86:10.1007/s11294-011-9338-8
    DOI: 10.1007/s11294-011-9338-8
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    More about this item

    Keywords

    Fiscal policy; Fiscal multipliers; Dynamic models; E62; E30; C10;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General

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