Fiscal Multipliers and the State of the Economy

Anja Baum, Marcos Poplawski Ribeiro and Anke Weber
Authors registered in the RePEc Author Service: Marcos Poplawski-Ribeiro

No 2012/286, IMF Working Papers from International Monetary Fund

Abstract: Only a few empirical studies have analyzed the relationship between fiscal multipliers and the underlying state of the economy. This paper investigates this link on a country-by-country basis for the G7 economies (excluding Italy). Our results show that fiscal multipliers differ across countries, calling for a tailored use of fiscal policy. Moreover, the position in the business cycle affects the impact of fiscal policy on output: on average, government spending, and revenue multipliers tend to be larger in downturns than in expansions. This asymmetry has implications for the choice between an upfront fiscal adjustment versus a more gradual approach.

Keywords: WP; revenue multiplier; output gap regime; impact multiplier; mean output gap; multiplier prediction; multipliers call; output gap data; Fiscal policy; business cycle; nonlinear analysis; fiscal multipliers; fiscal multiplier; Output gap; Fiscal consolidation; Europe (search for similar items in EconPapers)
Pages: 31
Date: 2012-12-05
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (193)

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