What Determines Government Spending Multipliers?

 
Author/Editor: Corsetti, Giancarlo ; Meier, André ; Müller, Gernot
 
Publication Date: June 01, 2012
 
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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(s): Budget deficits | Cross country analysis | Currency pegs | Exchange rate regimes | Financial crisis | Fiscal policy | Government expenditures | Public debt

Author's Keyword(s): Multiplier | fiscal policy | financial crisis | government spending | public finances | exchange rate regime
 
English
Publication Date: June 01, 2012
Format: Paper
Stock No: WPIEA2012150 Pages: 45
Price:
US$18.00 (Academic Rate:
US$18.00 )
 
 
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