Fiscal Multipliers in the 21st century
Pedro Brinca,
Hans Holter,
Per Krusell and
Laurence Malafry
Additional contact information
Laurence Malafry: Department of Economics, Stockholm University, Sweden
No 59, GEE Papers from Gabinete de Estratégia e Estudos, Ministério da Economia
Abstract:
Fiscal multipliers appear to vary greatly overtime and space. Based on VARs for a large number of countries, we document a strong correlation between wealth inequality and the magnitude of fiscal multipliers. In an attempt to account for this finding, we develop a life-cycle, overlapping generations economy with uninsurable labor market risk. We calibrate our model to match key characteristics of a number of OECD economies, including the distribution of wages and wealth, social security, taxes, and government debt and study how a fiscal multiplier depends on various country characteristics. We find that the fiscal multiplier is highly sensitive to the fraction of the population who face binding credit constraints and also to the average wealth level in the economy. These findings together help us generate across-country pattern of multipliers that is quite similar to that in the data.
Keywords: Fiscal multipliers; Wealth inequality; Government spending; Taxation (search for similar items in EconPapers)
JEL-codes: E62 H21 (search for similar items in EconPapers)
Pages: 17 pages
Date: 2015-09, Revised 2015-09
New Economics Papers: this item is included in nep-dge, nep-eec, nep-mac and nep-pbe
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Citations: View citations in EconPapers (5)
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https://www.gee.gov.pt/RePEc/WorkingPapers/GEE_PAPERS_59.pdf First version, 2015 (application/pdf)
Related works:
Journal Article: Fiscal multipliers in the 21st century (2016) 
Working Paper: Fiscal Multipliers in the 21st Century (2015) 
Working Paper: Fiscal Multipliers in the 21st Century (2015) 
Working Paper: Fiscal Multipliers in the 21st Century (2014) 
Working Paper: Fiscal Multipliers in the 21st Century (2014) 
Working Paper: Fiscal Multipliers in the 21st Century (2014) 
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Persistent link: https://EconPapers.repec.org/RePEc:mde:wpaper:0059
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