Medium-Term Fiscal Multipliers during Protracted Recessions

By Salvatore Dell'Erba, Marcos Poplawski Ribeiro, Ksenia Koloskova

December 5, 2014

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Salvatore Dell'Erba, Marcos Poplawski Ribeiro, and Ksenia Koloskova. Medium-Term Fiscal Multipliers during Protracted Recessions, (USA: International Monetary Fund, 2014) accessed December 26, 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 paper examines the consequences of fiscal consolidation in times of persistently low growth and high unemployment by estimating medium-term fiscal multipliers during protracted recessions (PR) in a sample of 17 OECD countries. Based on Jorda’s (2005) local projection methodology, we find that cumulative fiscal multipliers related to output, employment and unemployment at five-year horizons are significantly above one during PR episodes. These results suggest that medium-term fiscal consolidation plans to reduce public debt burdens should proceed gradually if economic activity remains below trend for a prolonged period.

Subject: Employment, Fiscal consolidation, Fiscal multipliers, Fiscal policy, Labor, Labor markets, Unemployment

Keywords: Consolidation multiplier, Cumulative multipliers, EB consolidation, EB multiplier, Employment, Fiscal consolidation, Fiscal consolidations, Fiscal multipliers, Fiscal policy, Global, Labor market, Labor markets, Labour market, Output effect, PR episode, PR period, Protracted recessions, Real GDP, TB consolidation, Unemployment, Unemployment multiplier, Unemployment rate, WP

Publication Details

Pages:

42
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2014/213
Stock No:

WPIEA2014213
ISBN:

9781498336192
ISSN:

1018-5941

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