How Big (Small?) are Fiscal Multipliers?

Ethan Ilzetzki, Enrique Mendoza and Carlos Vegh

No 16479, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We contribute to the debate on the macroeconomic effects of fiscal stimuli by showing 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.

JEL-codes: E2 E6 F41 H5 (search for similar items in EconPapers)
Date: 2010-10
New Economics Papers: this item is included in nep-cba, nep-mac, nep-opm and nep-pub
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Published as Ilzetzki, Ethan & Mendoza, Enrique G. & Végh, Carlos A., 2013. "How big (small?) are fiscal multipliers?," Journal of Monetary Economics, Elsevier, vol. 60(2), pages 239-254.

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Related works:
Journal Article: How big (small?) are fiscal multipliers? (2013)
Working Paper: How Big (Small?) are Fiscal Multipliers? (2011)
Working Paper: How Big (Small?) are Fiscal Multipliers? (2010)
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