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Fiscal Multipliers During Pandemics
Author:
Mr. Tidiane Kinda
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,
Andras Lengyel
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, and
Kaustubh Chahande
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Series:
IMF Working Papers
Volume/Issue:
Volume 2022: Issue 149
Language:
English
Publication Date:
22 Jul 2022
DOI:
https://doi.org/10.5089/9798400215698.001
ISBN:
9798400215698
ISSN:
1018-5941
Pages:
31
Keywords:
Fiscal multipliers; fiscal policy; health crises.; health crisis; fixed capital capital formation; pandemic state; transmission channel proxy; pandemic regime; COVID-19; Fiscal stimulus; Global; Middle East; multipliers in the pandemic state; pandemic indicator function; contemporaneous multiplier; containment measure
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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Many countries have deployed substantial fiscal packages to cushion the economic fallout from the COVID-19 pandemic. A historical look at past pandemics and epidemics highlights concomitant public sector support in response to health crises. This paper assesses how fiscal multipliers could vary during health crises, particularly how factors such as social distancing and uncertainty could lower contemporaneous (T) multipliers and increase near-term (T+1 and T+2) multipliers as economies re-open, including due to pent-up demand. Based on Jorda’s (2005) local projection methodology, the paper shows that cumulative fiscal multipliers one year after a health crisis is about twice larger than during normal times, particularly in advanced economies. These results suggest that large-scale fiscal support deployed at the onset of the COVID-19 pandemic could have larger than usual lingering impacts on economic activity, which need to be accounted for when calibrating policies.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund