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How Strong are Fiscal Multipliers in the GCC?
Author:
Mr. Raphael A Espinoza
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Mr. Abdelhak S Senhadji
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Series:
IMF Working Papers
Volume/Issue:
Volume 2011: Issue 061
Language:
English
Publication Date:
01 Mar 2011
DOI:
https://doi.org/10.5089/9781455221059.001
ISBN:
9781455221059
ISSN:
1018-5941
Pages:
20
Keywords:
WP; spending; GDP; estimate; country
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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The effectiveness of fiscal policy in smoothing the impact of shocks depends critically on the size of fiscal multipliers. This is particularly relevant for the GCC countries given the need for fiscal policy to cushion the economy from large terms of trade shocks in the absence of an independent monetary policy and where fiscal multipliers could be weak dues to substantial leakages through remittances and imports. The paper provides estimates of the size of fiscal multipliers using a variety of models. The focus is on government spending since tax revenues are small. The long-run multiplier estimates vary in the 0.3-0.7 range for current expenditure and 0.6-1.1 for capital spending, depending on the particular specification and estimation method chosen. These estimates fall within the range of fiscal multiplier estimates in the literature for non-oil emerging markets.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund