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Effects of Fiscal Stimulus in Structural Models

Author

Listed:
  • Michael Kumhof
  • Dirk V Muir
  • Carlos de Resende
  • Jan in ‘t Veld
  • René Lalonde
  • Davide Furceri
  • Annabelle Mourougane
  • John Roberts
  • Stephen Snudden
  • Mathias Trabandt
  • Günter Coenen
  • Susanna Mursula
  • Christopher J. Erceg
  • Charles Freedman
  • Jesper Lindé
  • Werner Roeger
  • Douglas Laxton

Abstract

The paper assesses, using seven structural models used heavily by policymaking institutions, the effectiveness of temporary fiscal stimulus. Models can, more easily than empirical studies, account for differences between fiscal instruments, for differences between structural characteristics of the economy, and for monetary-fiscal policy interactions. Findings are: (i) There is substantial agreement across models on the sizes of fiscal multipliers. (ii) The sizes of spending and targeted transfers multipliers are large. (iii) Fiscal policy is most effective if it has some persistence and if monetary policy accommodates it. (iv) The perception of permanent fiscal stimulus leads to significantly lower initial multipliers.

Suggested Citation

  • Michael Kumhof & Dirk V Muir & Carlos de Resende & Jan in ‘t Veld & René Lalonde & Davide Furceri & Annabelle Mourougane & John Roberts & Stephen Snudden & Mathias Trabandt & Günter Coenen & Susanna M, 2010. "Effects of Fiscal Stimulus in Structural Models," IMF Working Papers 10/73, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:10/73
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    References listed on IDEAS

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    More about this item

    Keywords

    Fiscal stimulus; Fiscal policy; Fiscal Multipliers; Government Deficits; inflation; real interest rate; aggregate demand; Open Economy Macroeconomics; International Policy Coordination and Transmission; Fiscal Policies and Behavior of Economic Agents: General;

    JEL classification:

    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian
    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy

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