 Local fiscal multipliers and spillover effects: Evidence from Philippine regionsEconomic Systems, 2021, vol. 45, issue 2 Abstract: Fiscal policy in developed countries has been a rich topic since the Great Recession. However, research has remained limited for developing countries despite their similar use of fiscal policy and concerns about the efficiency of public spending. To help address this research gap, this paper provides a case study of multiplier effects of local government spending in regions in the Philippines as well as spillover effects of local government spending across regions. An instrumental variable based on the country’s intergovernmental transfer system is used to identify regional public spending in panel regressions. The local fiscal multiplier is estimated to be above one, where a 1-peso rise in spending by local government units in a region corresponds to a 1.2-peso rise in regional output. Multiplier effects are highest for capital expenditures and appear to be primarily driven by the services sector. Spillover effects are comparatively large, at around 1.8–2.0, highlighting the important role of domestic trade when stimulating regional economic activity. Keywords: Fiscal policy; Fiscal multiplier; Local government spending; Fiscal spillover; Regional economic activity; Asian economy (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:ecosys:v:45:y:2021:i:2:s0939362520300716 DOI: 10.1016/j.ecosys.2020.100764 Access Statistics for this article Economic Systems is currently edited by R. Frensch More articles in Economic Systems from Elsevier Contact information at EDIRC. |
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