How big (small?) are fiscal multipliers?

Ethan Ilzetzki, Enrique Mendoza and Carlos Vegh

Journal of Monetary Economics, 2013, vol. 60, issue 2, 239-254

Abstract: Contributing to the debate on the macroeconomic effects of fiscal stimuli, we show that the impact of government expenditure shocks depends crucially on key country characteristics, such as the level of development, exchange rate regime, openness to trade, and public indebtedness. Based on a novel quarterly dataset of government expenditure in 44 countries, we find that (i) the output effect of an increase in government consumption is larger in industrial than in developing countries; (ii) the fiscal multiplier is relatively large in economies operating under predetermined exchange rates but is zero in economies operating under flexible exchange rates; (iii) fiscal multipliers in open economies are smaller than in closed economies; (iv) fiscal multipliers in high-debt countries are negative.

Date: 2013
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Related works:
Working Paper: How Big (Small?) are Fiscal Multipliers? (2011)
Working Paper: How Big (Small?) are Fiscal Multipliers? (2010)
Working Paper: How Big (Small?) are Fiscal Multipliers? (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:moneco:v:60:y:2013:i:2:p:239-254

DOI: 10.1016/j.jmoneco.2012.10.011

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