The Effectiveness of Fiscal Stimulus Packages in Times of Crisis

Walpurga Köhler-Töglhofer and Lukas Reiss ()
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Lukas Reiss: Oesterreichische Nationalbank, Economic Analysis Division

Monetary Policy & the Economy, 2009, issue Q1/09, 78–99

Abstract: This paper provides theoretical and empirical evidence on the effectiveness of discretionary fiscal policy in times of crisis. In “normal” times, a whole range of arguments speaks against the use of discretionary fiscal policy for stabilization purposes – yet amid the current sharp economic downturn, many of those arguments (such as implementation lags or low fiscal multipliers) have comparatively little weight. The OeNB estimates that the measures the Austrian government has adopted so far – an inflation package, two economic stimulus packages, personal income tax reform brought forward – will increase GDP by roughly ¾% and will provide for 12,000 additional jobs in 2009. The effects of those measures are expected to continue into 2010. However, as Austria’s debt ratio stands to increase substantially at the same time, the government would be well-advised to commit itself to cutting the deficit and debt ratios when the crisis is over.

Keywords: discretionary fiscal policy; effectiveness of fiscal policy; fiscal multipliers (search for similar items in EconPapers)
JEL-codes: E32 E62 E65 (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (1)

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