Medium-Term Fiscal Multipliers during Protracted Recessions
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Summary:
The paper examines the consequences of fiscal consolidation in times of persistently low growth and high unemployment by estimating medium-term fiscal multipliers during protracted recessions (PR) in a sample of 17 OECD countries. Based on Jorda’s (2005) local projection methodology, we find that cumulative fiscal multipliers related to output, employment and unemployment at five-year horizons are significantly above one during PR episodes. These results suggest that medium-term fiscal consolidation plans to reduce public debt burdens should proceed gradually if economic activity remains below trend for a prolonged period.
Series:
Working Paper No. 2014/213
Subject:
Employment Fiscal consolidation Fiscal multipliers Fiscal policy Labor Labor markets Unemployment
English
Publication Date:
December 5, 2014
ISBN/ISSN:
9781498336192/1018-5941
Stock No:
WPIEA2014213
Pages:
42
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