How Strong are Fiscal Multipliers in the GCC?

By Raphael A Espinoza, Abdelhak S Senhadji

March 1, 2011

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Format: Chicago

Raphael A Espinoza, and Abdelhak S Senhadji. How Strong are Fiscal Multipliers in the GCC?, (USA: International Monetary Fund, 2011) accessed November 23, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

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.

Subject: Capital spending, Current spending, Expenditure, Fiscal multipliers, Fiscal policy

Keywords: Country, Estimate, GDP, Spending, WP

Publication Details

Pages:

20
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2011/061
Stock No:

WPIEA2011061
ISBN:

9781455221059
ISSN:

1018-5941

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