Effects of Fiscal Stimulus in Structural Models

Author/Editor:

Michael Kumhof ; Dirk V Muir ; Carlos de Resende ; Jan in ‘t Veld ; René Lalonde ; Davide Furceri ; Annabelle Mourougane ; John Roberts ; Stephen Snudden ; Mathias Trabandt ; Günter Coenen ; Susanna Mursula ; Christopher J. Erceg ; Charles Freedman ; Jesper Lindé ; Werner Roeger ; Douglas Laxton

Publication Date:

March 1, 2010

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:

The paper assesses, using seven structural models used heavily by policymaking institutions, the effectiveness of temporary fiscal stimulus. Models can, more easily than empirical studies, account for differences between fiscal instruments, for differences between structural characteristics of the economy, and for monetary-fiscal policy interactions. Findings are: (i) There is substantial agreement across models on the sizes of fiscal multipliers. (ii) The sizes of spending and targeted transfers multipliers are large. (iii) Fiscal policy is most effective if it has some persistence and if monetary policy accommodates it. (iv) The perception of permanent fiscal stimulus leads to significantly lower initial multipliers.

Series:

Working Paper No. 2010/073

Subject:

English

Publication Date:

March 1, 2010

ISBN/ISSN:

9781451982169/1018-5941

Stock No:

WPIEA2010073

Pages:

121

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