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Fiscal Policy and Economic Activity During Recessions in Advanced Economies

Author

Listed:
  • Mr. Axel Schimmelpfennig
  • Ms. Selma Mahfouz
  • Mr. Richard Hemming

Abstract

Using data for advanced economies, this paper investigates whether factors identified in the theoretical and empirical literature explain the effectiveness of fiscal policy in responding to recessions. The results are informative about the fiscal response to recessions but provide only a partial explanation of the impact of fiscal policy on economic activity. Overall, it would appear that fiscal multipliers are very small.

Suggested Citation

  • Mr. Axel Schimmelpfennig & Ms. Selma Mahfouz & Mr. Richard Hemming, 2002. "Fiscal Policy and Economic Activity During Recessions in Advanced Economies," IMF Working Papers 2002/087, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2002/087
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    References listed on IDEAS

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    1. Fatas, Antonio & Mihov, Ilian, 2001. "Government size and automatic stabilizers: international and intranational evidence," Journal of International Economics, Elsevier, vol. 55(1), pages 3-28, October.
    2. Francesco Giavazzi & Marco Pagano, 1990. "Can Severe Fiscal Contractions Be Expansionary? Tales of Two Small European Countries," NBER Chapters, in: NBER Macroeconomics Annual 1990, Volume 5, pages 75-122, National Bureau of Economic Research, Inc.
    3. Dani Rodrik, 1998. "Why Do More Open Economies Have Bigger Governments?," Journal of Political Economy, University of Chicago Press, vol. 106(5), pages 997-1032, October.
    4. W. J. Henisz, 2000. "The Institutional Environment for Economic Growth," Economics and Politics, Wiley Blackwell, vol. 12(1), pages 1-31, March.
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    Citations

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    Cited by:

    1. Kashif Munir & Nimra Riaz, 2020. "Macroeconomic Effects of Exogenous Fiscal Policy Shocks in Pakistan: A Disaggregated SVAR Analysis," Hacienda Pública Española / Review of Public Economics, IEF, vol. 233(2), pages 141-165, June.
    2. Briotti, Maria Gabriella, 2004. "Fiscal adjustment between 1991 and 2002: stylised facts and policy implications," Occasional Paper Series 9, European Central Bank.
    3. Renee Philip & John Janssen, 2002. "Indicators of Fiscal Impulse for New Zealand," Treasury Working Paper Series 02/30, New Zealand Treasury.
    4. Piotr Bujak & Joanna Siwinska-Gorzelak, 2003. "Short-run Macroeconomic Effects of Discretionary Fiscal Policy Changes," CASE Network Studies and Analyses 0261, CASE-Center for Social and Economic Research.
    5. Tsvetomir Tsvetkov & Sonya Georgieva, 2021. "Anti-Crisis Macroeconomic Policy in the Conditions of COVID-19 in Bulgaria," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 1, pages 107-130.
    6. -, 2003. "Budget reform in OECD member countries: common trends," Sede de la CEPAL en Santiago (Estudios e Investigaciones) 34911, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    7. Jérôme Creel & Bruno Ducoudré & Catherine Mathieu & Henri Sterdyniak, 2005. "Doit-on oublier la politique budgétaire ?. Une analyse critique de la nouvelle théorie anti-keynésienne des finances publiques," Revue de l'OFCE, Presses de Sciences-Po, vol. 92(1), pages 43-97.
    8. Canale, Rosaria Rita & Napolitano, Oreste, 2009. "The recessive attitude of EMU policies: reflections on the italian experience, 1998–2008," MPRA Paper 20207, University Library of Munich, Germany.
    9. Serguei Kaniovski & Kurt Kratena & Markus Marterbauer, 2003. "Auswirkungen öffentlicher Konjunkturimpulse auf Wachstum und Beschäftigung," WIFO Studies, WIFO, number 24614, April.
    10. Zhiwei Zhang & Wenlang Zhang, 2009. "The Road to Recovery: Fiscal Stimulus, Financial Sector Rehabilitation, and Exit from Policy Easing," Working Papers 0918, Hong Kong Monetary Authority.
    11. Dong He & Zhiwei Zhang & Wenlang Zhang, 2009. "How Large Will Be The Effect Of China'S Fiscal Stimulus Package On Output And Employment?," Pacific Economic Review, Wiley Blackwell, vol. 14(5), pages 730-744, December.
    12. Carine Bouthevillain & John Caruana & Cristina Checherita & Jorge Cunha & Esther Gordo & Stephan Haroutunian & Geert Langenus & Amela Hubic & Bernhard Manzke & Javier J. Pérez & Pietro Tommasino, 2009. "Pros and cons of various fiscal measures to stimulate the economy," Economic Bulletin, Banco de España, issue JUL, pages 123-144, July.
    13. Cimadomo, Jacopo & Hauptmeier, Sebastian & Sola, Sergio, 2011. "Identifying the effects of government spending shocks with and without expected reversal: an approach based on U.S. real-time data," Working Paper Series 1361, European Central Bank.
    14. Zhang, Zhiwei & Zhang, Wenlang, 2011. "The road to recovery: Fiscal stimulus, financial sector rehabilitation, and potential risks ahead," Journal of Asian Economics, Elsevier, vol. 22(4), pages 311-321, August.
    15. repec:hal:spmain:info:hdl:2441/1769 is not listed on IDEAS
    16. Christiane Nickel & Andreas Tudyka, 2014. "Fiscal Stimulus in Times of High Debt: Reconsidering Multipliers and Twin Deficits," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 46(7), pages 1313-1344, October.
    17. Paweł Borys & Piotr Ciżkowicz & Andrzej Rzońca, 2014. "Panel Data Evidence on the Effects of Fiscal Policy Shocks in the EU New Member States," Fiscal Studies, Institute for Fiscal Studies, vol. 35, pages 189-224, June.
    18. Maria Gabriella Briotti, 2005. "Economic reactions to public finance consolidation - a survey of the literature," Occasional Paper Series 38, European Central Bank.
    19. Marek Lubiński, 2015. "Mnożnik fiskalny: reaktywacja," Gospodarka Narodowa. The Polish Journal of Economics, Warsaw School of Economics, issue 1, pages 5-26.
    20. Bowen, Alex & Stern, Nicholas, 2010. "Environmental policy and the economic downturn," LSE Research Online Documents on Economics 37589, London School of Economics and Political Science, LSE Library.
    21. repec:spo:wpecon:info:hdl:2441/1769 is not listed on IDEAS
    22. repec:hal:wpspec:info:hdl:2441/1769 is not listed on IDEAS

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