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Fiscal multipliers in the euro area: A comparative study⋆

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  • Collingro, Franziska
  • Frenkel, Michael

Abstract

Usually, studies on fiscal policy multipliers focus on a single country. In this paper, we estimate and compare the output effect of increases in government consumption and government investment in eleven euro area economies. Using quarterly data from Q1 2000 to Q4 2018, we identify exogenous increases in government spending based on a Cholesky decomposition, and compute impulse response functions based on linear projections. Our results suggest that typically euro area economies, that were severely affected by the Global Financial Crisis and the European Sovereign Debt Crisis, feature significant and negative output effects, while euro area economies that were only temporarily adversely affected by these crises feature significant and positive output effects. Our results are robust to different specifications of the estimation equation. Nevertheless, there is one exception from our general findings.

Suggested Citation

  • Collingro, Franziska & Frenkel, Michael, 2022. "Fiscal multipliers in the euro area: A comparative study⋆," The Quarterly Review of Economics and Finance, Elsevier, vol. 84(C), pages 386-397.
    • Handle: RePEc:eee:quaeco:v:84:y:2022:i:c:p:386-397
    DOI: 10.1016/j.qref.2020.08.005
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    References listed on IDEAS

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    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes

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