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What Determines Government Spending Multipliers?
Author:
Gernot Müller null

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Mr. Andre Meier
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Giancarlo Corsetti null

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Series:
IMF Working Papers
Volume/Issue:
Volume 2012: Issue 150
Language:
English
Publication Date:
01 Jun 2012
DOI:
https://doi.org/10.5089/9781475504217.001
ISBN:
9781475504217
ISSN:
1018-5941
Pages:
46
Keywords:
WP; government spending; exchange rate regime; monetary policy; stimulus package; Multiplier; fiscal policy; financial crisis; public finances; government spending shock; government spending multiplier; transmission mechanism; interest rate; fiscal policy transmission; standard error; financial crisis episode; response to a spending shock; exchange rate response; trade deficit; identifying government spending; Exchange rate arrangements; Real exchange rates; Global
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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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This paper studies how the effects of government spending vary with the economic environment. Using a panel of OECD countries, we identify fiscal shocks as residuals from an estimated spending rule and trace their macroeconomic impact under different conditions regarding the exchange rate regime, public indebtedness, and health of the financial system. The unconditional responses to a positive spending shock broadly confirm earlier findings. However, conditional responses differ systematically across exchange rate regimes, as real appreciation and external deficits occur mainly under currency pegs. We also find output and consumption multipliers to be unusually high during times of financial crisis.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund