Fiscal Multipliers and the State of the Economy

Author/Editor:

Anja Baum ; Marcos Poplawski Ribeiro ; Miss Anke Weber

Publication Date:

December 5, 2012

Electronic Access:

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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. 2012/286

Subject:

Expenditure Fiscal consolidation Fiscal multipliers Fiscal policy Output gap Production

English

Publication Date:

December 5, 2012

ISBN/ISSN:

9781475565829/1018-5941

Stock No:

WPIEA2012286

Pages:

31

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