## Fiscal Multipliers During Pandemics

_IMF Working Papers, July 22, 2022_

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**Canonical URL:** [Fiscal Multipliers During Pandemics](https://www.imf.org/en/publications/wp/issues/2022/07/22/fiscal-multipliers-during-pandemics-521191)

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## Bibliographic details
- Authors: Tidiane Kinda, Andras Lengyel, Kaustubh Chahande
- Published: July 22, 2022
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9798400215698.001

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### Summary findings
- Many countries deployed substantial fiscal packages to cushion the economic fallout from the COVID-19 pandemic.
- A historical look at past pandemics and epidemics highlights concomitant public sector support in response to health crises.
- The paper assesses how fiscal multipliers could vary during health crises, particularly how factors such as social distancing and uncertainty could lower contemporaneous (T) multipliers and increase near-term (T+1 and T+2) multipliers as economies re-open, including due to pent-up demand.
- Based on Jorda’s (2005) local projection methodology, the paper shows that cumulative fiscal multipliers one year after a health crisis is about twice larger than during normal times, particularly in advanced economies.
- These results suggest that large-scale fiscal support deployed at the onset of the COVID-19 pandemic could have larger than usual lingering impacts on economic activity, which need to be accounted for when calibrating policies.

### Methodology and analytical scope
- Estimation approach: Jorda’s (2005) local projection methodology.
- Timing of multiplier effects emphasized:
  - Contemporaneous (T) multipliers: potentially lowered by social distancing and uncertainty.
  - Near-term (T+1 and T+2) multipliers: potentially increased as economies re-open and pent-up demand is realized.
- Geographic and economic scope: results are particularly pronounced in advanced economies.

### Policy implications and recommendations
- Calibration of fiscal policy should account for elevated near-term cumulative multipliers following health crises.
- Large-scale fiscal support at the onset of pandemics may produce larger lingering impacts on economic activity than in normal times; policymakers should consider these persistent effects when designing stimulus size and timing.
- Consideration of behavioral and public health factors (social distancing, uncertainty) is crucial when assessing the contemporaneous effectiveness of fiscal measures.

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_Source: https://www.imf.org/en/publications/wp/issues/2022/07/22/fiscal-multipliers-during-pandemics-521191_