Fiscal Multipliers During Pandemics

By Tidiane Kinda, Andras Lengyel, Kaustubh Chahande

July 22, 2022

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Format: Chicago

Tidiane Kinda, Andras Lengyel, and Kaustubh Chahande. Fiscal Multipliers During Pandemics, (USA: International Monetary Fund, 2022) accessed December 21, 2024

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.

Summary

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.

Subject: COVID-19, Expenditure, Fiscal multipliers, Fiscal policy, Fiscal stimulus, Health

Keywords: Containment measure, Contemporaneous multiplier, COVID-19, Fiscal multipliers, Fiscal policy, Fiscal stimulus, Fixed capital capital formation, Global, Health crises., Health crisis, Middle East, Multipliers in the pandemic state, Pandemic indicator function, Pandemic regime, Pandemic state, Transmission channel proxy

Publication Details

Pages:

31
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2022/149
Stock No:

WPIEA2022149
ISBN:

9798400215698
ISSN:

1018-5941

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