Fiscal Multipliers and the State of the Economy

Author/Editor:

Anja Baum ; Marcos Poplawski Ribeiro ; Anke Weber

Publication Date:

December 5, 2012

Electronic Access:

Free Download. Use the free Adobe Acrobat Reader to view this PDF file

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:

Only a few empirical studies have analyzed the relationship between fiscal multipliers and the underlying state of the economy. This paper investigates this link on a country-by-country basis for the G7 economies (excluding Italy). Our results show that fiscal multipliers differ across countries, calling for a tailored use of fiscal policy. Moreover, the position in the business cycle affects the impact of fiscal policy on output: on average, government spending, and revenue multipliers tend to be larger in downturns than in expansions. This asymmetry has implications for the choice between an upfront fiscal adjustment versus a more gradual approach.

Series:

Working Paper No. 12/286

Subject:

Business cycles Cross country analysis Fiscal policy Group of seven Production growth

English

Publication Date:

December 5, 2012

ISBN/ISSN:

9781475565829/1018-5941

Stock No:

WPIEA2012286

Format:

Paper

Pages:

31

Please address any questions about this title to publications@imf.org