Country Heterogeneity and the International Evidence on the Effects of Fiscal Policy

Francesco Giavazzi, Carlo Favero and Jacopo Perego

No 8517, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: This paper shows how the richer frequency and variety of fiscal policy shocks available in an international sample can be analyzed recognizing the heterogeneity that exists across different countries. The main conclusion of our empirical analysis is that the question 'what is the fiscal policy multiplier' is an ill-posed one. There is no unconditional fiscal policy multiplier. The effect of fiscal policy on output is different depending on the different debt dynamics, the different degree of openness and the different fiscal reaction functions across different countries. There are many fiscal multipliers and an average fiscal multiplier is of very little use to describe the effect of exogenous shifts in fiscal policy on output.

Keywords: Fiscal policy; Public debt; Government budget constraint; Global var models (search for similar items in EconPapers)
JEL-codes: E62 H60 (search for similar items in EconPapers)
Date: 2011-08
New Economics Papers: this item is included in nep-cba and nep-mac
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Citations: View citations in EconPapers (67)

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Related works:
Journal Article: Country Heterogeneity and the International Evidence on the Effects of Fiscal Policy (2011)
Working Paper: Country Heterogeneity and the International Evidence on the Effects of Fiscal Policy (2011)
Working Paper: Country Heterogeneity and the International Evidence on the Effects of Fiscal Policy (2011)
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