Fiscal Multipliers and the State of the Economy

By Anja Baum, Marcos Poplawski Ribeiro, Anke Weber

December 5, 2012

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Anja Baum, Marcos Poplawski Ribeiro, and Anke Weber. Fiscal Multipliers and the State of the Economy, (USA: International Monetary Fund, 2012) accessed November 22, 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

Only a few empirical studies have analyzed the relationship between fiscal multipliers and the underlying state of the economy. This paper investigates this link on a country-by-country basis for the G7 economies (excluding Italy). Our results show that fiscal multipliers differ across countries, calling for a tailored use of fiscal policy. Moreover, the position in the business cycle affects the impact of fiscal policy on output: on average, government spending, and revenue multipliers tend to be larger in downturns than in expansions. This asymmetry has implications for the choice between an upfront fiscal adjustment versus a more gradual approach.

Subject: Expenditure, Fiscal consolidation, Fiscal multipliers, Fiscal policy, Output gap, Production

Keywords: Business cycle, Europe, Fiscal consolidation, Fiscal multiplier, Fiscal multipliers, Fiscal policy, Impact multiplier, Mean output gap, Multiplier prediction, Multipliers call, Nonlinear analysis, Output gap, Output gap data, Output gap regime, Revenue multiplier, WP

Publication Details

Pages:

31
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2012/286
Stock No:

WPIEA2012286
ISBN:

9781475565829
ISSN:

1018-5941

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