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Demand effects of fiscal policy since 2008

Author

Listed:
  • Engelbert Stockhammer

    (King's College London, UK)

  • Walid Qazizada

    (OXUS Consulting Group, Kabul, Afghanistan)

  • Sebastian Gechert

    (Institut für Makroökonomie und Konjunkturforschung (IMK), Hans Böckler Stiftung, Düsseldorf, Germany)

Abstract

The Great Recession of 2007–2009 has led to controversies about the role of fiscal policy. Academically this has translated into renewed interest in the effects of fiscal policy. Several studies have since suggested that fiscal multipliers are substantially larger in downswings or depressions than in upswings. In terms of economic policy reactions, countries have differed substantially in their fiscal stance. It is an important open question how big the impact of these policies on economic growth has been. The paper uses the regime-dependent multiplier estimates by Qazizada and Stockhammer (2015) and by Gechert and Rannenberg (2014) to calculate the demand effects of fiscal policy for Germany, the USA, the UK, Greece, Ireland, Italy, Portugal and Spain since 2008. This allows us to assess to what extent fiscal policy explains different economic performances across countries. We find expansionary fiscal policy in 2008–2009 in all countries, but since 2010 fiscal policies have differed. While the fiscal effect was roughly neutral in Germany, the UK and the USA, it was large and negative in Greece, Ireland, Italy, Portugal and Spain.

Suggested Citation

  • Engelbert Stockhammer & Walid Qazizada & Sebastian Gechert, 2019. "Demand effects of fiscal policy since 2008," Review of Keynesian Economics, Edward Elgar Publishing, vol. 7(1), pages 57-74, January.
    • Handle: RePEc:elg:rokejn:v:7:y:2019:i:1:p57-74
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    Cited by:

    1. Philipp Heimberger, 2025. "Fiscal consolidation and its growth effects in euro area countries: past, present and future outlook," Review of Evolutionary Political Economy, Springer, vol. 6(3), pages 589-617, December.
    2. Vajrapatkul, Adirek & Vajrapatkul, Pinmanee, . "Effects of Fiscal Policy in a Closed Economy: A Dynamic AD-AS Framework Analysis," Asian Journal of Applied Economics, Kasetsart University, Center for Applied Economics Research, vol. 32(1).
    3. Engelbert Stockhammer & Collin Constantine & Severin Reissl, 2020. "Explaining the Euro crisis: current account imbalances, credit booms and economic policy in different economic paradigms," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 43(2), pages 231-266, April.
    4. Philipp Heimberger, 2017. "Did fiscal consolidation cause the double-dip recession in the euro area?," Review of Keynesian Economics, Edward Elgar Publishing, vol. 5(3), pages 439-458, July.
    5. Jungmann, Benjamin, 2021. "Growth drivers in emerging capitalist economies before and after the Global Financial Crisis," IPE Working Papers 172/2021, Berlin School of Economics and Law, Institute for International Political Economy (IPE).
    6. Philipp Heimberger, 2017. "Österreichs Staatsausgabenstrukturen im europäischen Vergleich," wiiw Research Reports in German language 8, The Vienna Institute for International Economic Studies, wiiw.
    7. Benjamin Jungmann, 2023. "Growth drivers in emerging capitalist economies: building blocks for a post-Keynesian analysis and an empirical exploration of the years before and after the Global Financial Crisis," Review of Evolutionary Political Economy, Springer, vol. 4(2), pages 349-386, July.
    8. Stefano di Bucchianico, 2019. "A bit of Keynesian debt-to-GDP arithmetic for deficit-capped countries," Bulletin of Political Economy, Bulletin of Political Economy, vol. 13(1), pages 55-83, June.
    9. Tugba Demirtas, 2023. "The Growth Effect of the Expansionary Monetary and Fiscal Policies Applied in the Periods When The Economies Shrank: Developed and Developing Countries Cases," Eurasian Journal of Social Sciences, Eurasian Publications, vol. 11(3-4), pages 95-114.
    10. António Afonso & Frederico Silva Leal, 2022. "Fiscal episodes in the Economic and Monetary Union: Elasticities and non‐Keynesian effects," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(1), pages 571-593, January.
    11. Engelbert Stockhammer & Syed Mohib Ali, 2018. "Varieties of Capitalism and post-Keynesian economics on Euro crisis," Wirtschaft und Gesellschaft - WuG, Kammer für Arbeiter und Angestellte für Wien, Abteilung Wirtschaftswissenschaft und Statistik, vol. 44(3), pages 349-370.
    12. Karsten Kohler & Engelbert Stockhammer, 2022. "Growing differently? Financial cycles, austerity, and competitiveness in growth models since the Global Financial Crisis," Review of International Political Economy, Taylor & Francis Journals, vol. 29(4), pages 1314-1341, July.
    13. Engelbert Stockhammer & Andre Novas Otero, 2023. "A tale of housing cycles and fiscal policy, not competitiveness. Growth drivers in Southern Europe," New Political Economy, Taylor & Francis Journals, vol. 28(3), pages 483-505, May.
    14. Engelbert Stockhammer & Karsten Kohler, 2023. "Learning from distant cousins? Post-Keynesian Economics, Comparative Political Economy, and the Growth Models approach," Chapters, in: Thomas Palley & Esteban Pérez Caldentey & Matías Vernengo (ed.), Varieties of Capitalism, chapter 3, pages 56-75, Edward Elgar Publishing.

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    JEL classification:

    • C36 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Instrumental Variables (IV) Estimation
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory

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