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Global effects of fiscal stimulus during the crisis

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

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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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
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505566

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