What Determines Government Spending Multipliers?

Author/Editor:

Gernot Müller ; Andre Meier ; Giancarlo Corsetti

Publication Date:

June 1, 2012

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

This paper studies how the effects of government spending vary with the economic environment. Using a panel of OECD countries, we identify fiscal shocks as residuals from an estimated spending rule and trace their macroeconomic impact under different conditions regarding the exchange rate regime, public indebtedness, and health of the financial system. The unconditional responses to a positive spending shock broadly confirm earlier findings. However, conditional responses differ systematically across exchange rate regimes, as real appreciation and external deficits occur mainly under currency pegs. We also find output and consumption multipliers to be unusually high during times of financial crisis.

Series:

Working Paper No. 12/150

Subject:

English

Publication Date:

June 1, 2012

ISBN/ISSN:

9781475504217/1018-5941

Stock No:

WPIEA2012150

Price:

$18.00 (Academic Rate:$18.00)

Format:

Paper

Pages:

46

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