FIR-GEM: A SOE-DSGE Model for fiscal policy analysis in Ireland

Petros Varthalitis ()

MPRA Paper from University Library of Munich, Germany

Abstract: This paper presents FIR-GEM: Fiscal IRish General Equilibrium Model. FIR-GEM is a small open economy DSGE model designed as fiscal toolkit for fiscal policy analysis in Ireland. To illustrate the model's potential for fiscal policy analysis, we conduct three types of experiments. First, we analyse the fiscal transmission mechanism through which Irish fiscal policy affects the Irish economy. Second, we compute fiscal multipliers for the main tax-spending instruments, namely government consumption, public investment, public wage bill, public transfers, consumption, labour and capital tax. We focus on a fiscal policy stimulus that is either implemented through spending increases or tax cuts. Third, we perform robustness analysis on key structural characteristics that can affect quantitatively the size of fiscal multipliers. We find that the size of fiscal multipliers in the Irish economy heavily depends on its degree of openness, the method of fiscal financing employed, the elasticity of the sovereign risk premia to Irish debt dynamics and the flexibility of Irish labour and product markets.

Keywords: Keywords: Fiscal policy; DSGE; Ireland; Openness. (search for similar items in EconPapers)
JEL-codes: E62 F41 F42 (search for similar items in EconPapers)
Date: 2019-04
New Economics Papers: this item is included in nep-dge, nep-eec, nep-mac and nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Working Paper: FIR-GEM: A SOE-DSGE Model for fiscal policy analysis in Ireland (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:93059

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