How Big (Small?) are Fiscal Multipliers?
AbstractWe 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 fiscal 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.
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Bibliographic InfoPaper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp1016.
Date of creation: Oct 2010
Date of revision:
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Web page: http://cep.lse.ac.uk/_new/publications/series.asp?prog=CEP
government expenditure; macroeconomic policy;
Other versions of this item:
- Ethan Ilzetzki & Enrique G. Mendoza & Carlos A. Végh, 2010. "How Big (Small?) are Fiscal Multipliers?," NBER Working Papers 16479, National Bureau of Economic Research, Inc.
- Ethan Ilzetzki & Enrique G. Mendoza & Carlos A. VÃ©gh Gramont, 2011. "How Big (Small?) are Fiscal Multipliers?," IMF Working Papers 11/52, International Monetary Fund.
- E2 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment
- E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
- H5 - Public Economics - - National Government Expenditures and Related Policies
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-11-13 (All new papers)
- NEP-CBA-2010-11-13 (Central Banking)
- NEP-MAC-2010-11-13 (Macroeconomics)
- NEP-OPM-2010-11-13 (Open Economy Macroeconomic)
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Blog mentionsAs found by EconAcademics.org, the blog aggregator for Economics research:
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