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Effects of Fiscal Stimulus in Structural Models

Author

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

  • Mr. Michael Kumhof & Günter Coenen & Mr. Dirk V Muir & Charles Freedman & Susanna Mursula & Christopher J. Erceg & Davide Furceri & René Lalonde & Jesper Lindé & Annabelle Mourougane & John Roberts & , 2010. "Effects of Fiscal Stimulus in Structural Models," IMF Working Papers 2010/073, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:2010/073
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    More about this item

    Keywords

    WP; consumption; inflation; GDP;
    All these keywords.

    JEL classification:

    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • 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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