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Are Estimates of Fiscal Multipliers Truly Reliable? Some Observations Starting from the Case of Japan

Author

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  • Venturini, Fiorenza

    (Università degli Studi di Roma "La Sapienza" (La Sapienza University of Rome))

Abstract

The aim of this paper is to discuss the reliability of the estimates of fiscal multipliers to be found in the empirical literature by studying the case of the Japanese lost decade. We start from the literature considering Japan as proof of the general ineffectiveness of public spending. We identify the critical aspects that the estimates of fiscal multipliers present due to the theoretical assumptions that lie behind the obtained values. We then highlight the importance of the institutional context in which fiscal policies are pursued and the relevance of the quality of ex-penditure. We conclude that the results of the estimates may be strongly influenced by the reference theoretical framework and that they neglect relevant aspects, such as the composition of expenditure and the multiplicative effect of each policy measure. They cannot therefore constitute the sole basis to appraise the effectiveness of fiscal policy.

Suggested Citation

  • Venturini, Fiorenza, 2016. "Are Estimates of Fiscal Multipliers Truly Reliable? Some Observations Starting from the Case of Japan," Centro Sraffa Working Papers CSWP23, Centro di Ricerche e Documentazione "Piero Sraffa".
    • Handle: RePEc:ris:sraffa:0023
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    More about this item

    Keywords

    Japan’s lost decade; fiscal multipliers; fiscal policy;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory

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