ON FISCAL MULTIPLIERS: ESTIMATES FROM A MEDIUM SCALE DSGE MODEL

Sarah Zubairy

International Economic Review, 2014, vol. 55, issue 1, 169-195

Abstract: This article contributes to the debate on fiscal multipliers, in the context of an estimated dynamic stochastic general equilibrium model, featuring a rich fiscal policy block and a transmission mechanism for government spending shocks. I find the multiplier for government spending to be 1.07, which is largest on impact. The multipliers for labor and capital tax on impact are 0.13 and 0.34, respectively. The effects of tax cuts take time to build and exceed stimulative effects of spending by 12–20 quarters. I carry out counterfactual exercises to show how alternative financing methods and expected monetary policy have consequences for the size of fiscal multipliers.

Date: 2014
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https://doi.org/10.1111/iere.12045

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Working Paper: On Fiscal Multipliers: Estimates from a Medium Scale DSGE Model (2010)
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