Estimating Fiscal Multipliers Under Alternative Exchange Rate Regimes: The Case of Bolivia
Electronic Access:
Free Download. Use the free Adobe Acrobat Reader to view this PDF file
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:
Empirical (employing the Blanchard-Perotti framework) and modeling (using a country-specific DSGE model) approaches are used to estimate fiscal multipliers by policy instrument for Bolivia, to evaluate possible adjustments in a fiscal consolidation strategy. Multipliers are also estimated using alternative assumptions about the accompanying exchange rate regime and capital mobility, highlighting the importance of the policy mix in determining the impact of fiscal adjustments. The study exploits the DSGE modeling structure to assess this interaction of fiscal and monetary policy in a lower middle-income country under different exchange rate regimes. It finds that expenditure multipliers fall into the range of 1/3 to 2/3, with public investment multipliers slightly higher than government consumption multipliers over longer horizons, and multipliers generally higher under a peg than inflation targeting. Tax multipliers are shown to be about half of expenditure multipliers.
Series:
Working Paper No. 2023/240
Subject:
Consumption Current spending Expenditure Fiscal multipliers Fiscal policy National accounts Public investment spending
Frequency:
regular
English
Publication Date:
November 17, 2023
ISBN/ISSN:
9798400260285/1018-5941
Stock No:
WPIEA2023240
Format:
Paper
Pages:
41
Please address any questions about this title to publications@imf.org