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Effects of Fiscal Stimulus in Structural Models

Author/Editor: Coenen, Günter | Erceg, Christopher | Freedman, Charles | Furceri, Davide | Kumhof, Michael | Lalonde, René | Laxton, Douglas | Lindé, Jesper | Mourougane, Annabelle | Muir, Dirk | Mursula, Susanna | Roberts, John | Roeger, Werner | de Resende, Carlos | Snudden, Stephen | Trabandt, Mathias | in ‘t Veld, Jan
Authorized for Distribution: March 1, 2010
Electronic Access: Free Full Text (PDF file size is 1,325KB)
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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: The paper assesses, using seven structural models used heavily by policymaking institutions, the effectiveness of temporary fiscal stimulus. 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. Findings are: (i) There is substantial agreement across models on the sizes of fiscal multipliers. (ii) The sizes of spending and targeted transfers multipliers are large. (iii) Fiscal policy is most effective if it has some persistence and if monetary policy accommodates it. (iv) The perception of permanent fiscal stimulus leads to significantly lower initial multipliers.
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Series: Working Paper No. 10/73
Subject(s): Budget deficits | Cross country analysis | Economic forecasting | Economic models | Europe | Fiscal policy | Government expenditures | Monetary policy | Public debt | Stabilization measures | Taxes | United States
Author's keyword(s): Fiscal Policy | Fiscal Stimulus | Fiscal Multipliers | Government Deficits
    Published:   March 1, 2010        
            Format:   Paper
    Stock No:   WPIEA2010073   Pages:   121
    Price:   US$18.00 (Academic Rate: US$18.00 )
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