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How Big (Small?) are Fiscal Multipliers?
Author: Ethan Ilzetzki, Mr. Enrique G. Mendoza, and Mr. Carlos A. Végh Gramont
Series:
IMF Working Papers
Volume/Issue:
Volume 2011: Issue 052
Language:
English
Publication Date:
01 Mar 2011
DOI:
https://doi.org/10.5089/9781455218028.001
ISBN:
9781455218028
ISSN:
1018-5941
Pages:
66
Keywords:
WP; government; country; government investment
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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We contribute to the intense debate on the real effects of fiscal stimuli by showing that the impact of government expenditure shocks depends crucially on key country characteristics, such as the level of development, exchange rate regime, openness to trade, and public indebtedness. Based on a novel quarterly dataset of government expenditure in 44 countries, we find that (i) the output effect of an increase in government consumption is larger in industrial than in developing countries, (ii) the fisscal multiplier is relatively large in economies operating under predetermined exchange rate but zero in economies operating under flexible exchange rates; (iii) fiscal multipliers in open economies are lower than in closed economies and (iv) fiscal multipliers in high-debt countries are also zero.
Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund

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