Effects of Fiscal Stimulus in Structural Models
IMF Working Papers, March 1, 2010
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- Effects of Fiscal Stimulus in Structural Models
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Bibliographic details
- Authors: 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
- Published: March 1, 2010
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451982169.001
Overview
- The paper assesses, using seven structural models used heavily by policymaking institutions, the effectiveness of temporary fiscal stimulus.
- Rationale: 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.
Key findings
- There is substantial agreement across models on the sizes of fiscal multipliers.
- The sizes of spending and targeted transfers multipliers are large.
- Fiscal policy is most effective if it has some persistence and if monetary policy accommodates it.
- The perception of permanent fiscal stimulus leads to significantly lower initial multipliers.
Policy implications and interactions
- Monetary accommodation increases the effectiveness of temporary fiscal stimulus.
- Persistence in fiscal measures enhances their potency.
- Perceptions about permanence of stimulus influence initial multiplier effects, with perceived permanence reducing initial impact.
Subject and keywords
- Subject: Accommodative monetary policy, Fiscal multipliers, Fiscal stimulus, Public investment spending, Real interest rates
- Keywords: consumption, GDP, inflation, WP