Procyclical and Countercyclical Fiscal Multipliers: Evidence from OECD Countries Daniel Riera-Crichton, Carlos A. Vegh, and Guillermo Vuletin NBER Working Paper No. 20533 September 2014, Revised March 2015 JEL No. E62,F41 ABSTRACT Using non-linear methods, we argue that existing estimates of government spending multipliers i Procyclical and Countercyclical Fiscal Multipliers: Evidence from OECD Countries. Using non-linear methods, we argue that existing estimates of government spending multipliers in expansion and recession may yield biased results by ignoring whether government spending is increasing or decreasing. In the case of OECD countries, the problem originates.
When we compute multipliers for OECD countries for each of the four states of the world captured in Table 1, we find that the largest multiplier (after 2 and 4 semesters) corresponds to cell (2,2), reaching 2.3 after four semesters. In other words, the countercyclical fiscal multiplier in bad times is the largest of the four possible multipliers average OECD country, have a fiscal balance effect over the period 2008-10 which is about three times the discretionary fiscal action currently planned by governments in response to the crisis.28 Revenues had been 28. This is a calculation of the unweighted average across those OECD countries taking positive stimulus measures Fiscal multipliers are typically defined as the ratio of a change in output to an exogenous and temporary change in the fiscal deficit with respect to their respective baselines (Spilimbergo, Symansky, and Schindler, 2009). In spite of an extensive literature, there is still no consensus regarding the size of fiscal multipliers Another IMF paper (2012) also finds very low multipliers for the UK under fiscal contraction, even when the economy is weak. This paper estimates the government spending multiplier is at most 0.2 when the output gap is negative and zero when the output gap is positive and that the government revenue multiplier is not significantly different from zero
Part 2. Fiscal multipliers and fiscal consolidations . This paper looks at various aspects of fiscal consolidation in 18 OECD economies. The prospects for fiscal consolidation depend upon the problems the country may face with its debt stock, the political will to deal with these problems and on the costs of consolidation Fiscal multipliers for government consumption expenditure and investment expenditures OECD Development Centr Why are Fiscal Multipliers Asymmetric? The Role of 19 OECD countries between 1970 and 2001 for half of this period. There are a handful of papers that look at both government spending and tax multipliers collectively, and the variation in estimates between the two can provid Fiscal Multipliers and Fiscal Consolidations. This paper looks at various aspects of fiscal consolidation in 18 OECD economies. The prospects for fiscal consolidation depend upon the problems the country may face with its debt stock, the political will to deal with these problems and on the costs of consolidation
Downloadable! In this paper, we estimate government purchase multipliers for a large number of OECD countries, allowing these multipliers to vary smoothly according to the state of the economy and using real-time forecast data to purge policy innovations of their predictable components. We adapt our previous methodology (Auerbach and Gorodnichenko, 2011) to use direct projections rather than. More specifically: Efficiency gains in public spending on health and education could yield savings of 0.5% to 4.5% of GDP in the longer term. There is scope to broaden tax bases by eliminating tax expenditures (such as tax credits or deductions)
Table 4.6 - Short-term fiscal multipliers OECD Economic Outlook, Volume 2010 Issue 2 The OECD Economic Outlook analyses the current economic situation and examines the economic policies required to foster a sustained recovery in member countries. This issue covers the outlook to end-2012 for both OECD countries and selected non-OECD economies In a multi-country exercise, where we calibrate 15 OECD countries to country-specific data, we obtain raw correlations between the fiscal multipliers generated by our model and the wealth Gini׳s and capital-output ratios that are 0.62 and −0.68, respectively Fiscal multipliers measure the short-term impact of discretionary fiscal policy on output. They are usually defined as the ratio of a change in output to an exogenous change in the fis-cal deficit with respect to their respective baselines (Box 1).1 Better estimation and use of multipliers can play a key role in ensuring macroeconomi
(2010) have concluded that fiscal multipliers were about 1.6.3 Second, lower output and lower income, together with a poorly functioning financial system, imply that consumption may have depended more on current than on future income, and tha We then incorporate the share of public debt held by foreigners to estimate conditional multipliers. Our main result is that the fiscal multipliers are increasing in the share of public debt held by foreigners. This result holds both for the post-war US economy, and for a panel of OECD economies over the last few decades The OECD just published its November 2016 Global Economic Outlook. Their projections suggest an acceleration of global growth rates in particular in countries with plans for a fiscal expansion. In the case of the US, and based on the plans of the Trump administration, the OECD projects an acceleration of GDP growth to 3% in 2018.I am very glad to see that the OECD is more open to the idea.
Internationally-comparable data from the OECD show that Australia's unemployment rate has risen from 3.9% in the February 2008 to 5.8% in July 2009, adjustment to account for the possibility that fiscal multipliers are smaller than normal in the current situation, du Fiscal Multipliers in the 21st CenturyI 1 Pedro Brincaa,b,c,1 Hans A. Holterd, Per Kruselle, Laurence Malafryf 2 aNova School of Business and Economics, Universidade Nova de Lisboa 3 bCentro de Economia e Financas,¸ Universidade do Porto 4 cRobert Schuman Centre for Advanced Studies, European University Institute 5 dUniversity of Oslo 6 eIIES, Stockholm Universit Fiscal Multipliers in Recession and Expansion. Alan J. Auerbach & Yuriy Gorodnichenko. Share. Twitter LinkedIn Email. Working Paper 17447 DOI 10.3386/w17447 Issue Date September 2011. In this paper, we estimate government purchase multipliers for a large number of OECD countries,.
Downloadable! This paper looks at various aspects of fiscal consolidation in 18 OECD economies. The prospects for fiscal consolidation depend upon the problems the country may face with its debt stock, the political will to deal with these problems and on the costs of consolidation. The analysis is based on a series of simulations using the National Institute Global Econometric Model, NiGEM multipliers of government spending are the norm; the tax multipliers are even smaller; 3) To understand the effects of fiscal policy on prices, the price elasticity of government budget items is crucial, an issue that has not been widely appreciated; 4) Once plausible values of the price elasticity o The simulations suggest that fiscal policy is effective in supporting activity, especially in the short term. In particular, the largest fiscal multipliers are found for an increase in public investment, public consumption and a cut in the wage tax. The results are robust to different parameter calibrations and are economically significant Multipliers are also important elements to take into consideration in policy advice and design. 2 Underestimating multipliers may lead countries to set unachievable fiscal targets, and miscalculate the amount of adjustment necessary to curb their debt ratio (Eyraud and Weber, 2012, 2013).This could affect the credibility of fiscal consolidation programs The OECD Fiscal Decentralisation Database provides comparative information on the following indicators analysed by level of government sector (Federal or Central, including Social Security, State/Regional and Local), for OECD member countries between 1965 and 2019. The tax autonomy indicators are.
Fiscal multipliers measure the short-term impact of discretionary fiscal policy on output. They are usually defined as the ratio of a change in output to an exogenous change in the fiscal deficit with respect to their respective baselines (Box 1).3 Box 1. Definitions Fiscal multipliers can be measured in several ways In line with these assumptions, earlier analysis by the IMF staff suggests that, on average, fiscal multipliers were near 0.5 in advanced economies during the three decades leading up to 2009. If the multipliers underlying the growth forecasts were about 0.5, as this informal evidence suggests, our results indicate that multipliers have actually been in the 0.9 to 1.7 range since the Great. Unemployment Fiscal Multipliers Tommaso Monacelli, Roberto Perotti, and Antonella Trigari NBER Working Paper No. 15931 April 2010 JEL No. D91,E62,J64 ABSTRACT We estimate the effects of fiscal policy on the labor market in US data. An increase in government spending of 1 percent of GDP generates output and unemployment multipliers respectively. All OECD countries compile their data according to the 2008 System of National Accounts (SNA 2008). Citation. Please cite this indicator as follows: Related publications. National Accounts of OECD Countries Publication (2021) Understanding National Accounts Publication (2014) Peter van de Ven (2015. Gechert, S, A Hughes Hallett, and A Rannenberg (2015), Fiscal multipliers in downturns and the Effects of Eurozone Consolidation, CEPR Policy Insight 79. Girouard, N and C André (2005), Measuring cyclically adjusted budget balances for OECD Economies, OECD Economics Department Working Paper 434
The fiscal revenue multiplier is expressed as:. ∆Y ∆T (1 see Spilimbergo, A., S. Symansky, and M. Schindler, 2009)The importance of fiscal multipliers. Fiscal policy is commonly used to help 'smooth' demand following an economic shock. It is important for a government to have an accurate assessment of the size of these multipliers at various times and under different circumstances so. Fiscal Multipliers. La Follette School of Public Affairs Working Paper No. 2015-002. 17 Pages Posted: 31 Jan 2013. See all articles by Menzie David Chinn Menzie David Chinn. University of Wisconsin, Madison - Robert M. La Follette School of Public Affairs and Department of Economics; National Bureau of Economic Research (NBER In this paper, we estimate government purchase multipliers for Japan, following the approach used previously for a panel of OECD countries (Auerbach and Gorodnichenko, 2013). This approach allows multipliers to vary smoothly according to the state of the economy and uses real-time forecast data to purge policy innovations of their predictable components The OECD's report—Tax and Fiscal Policy in Response to the Coronavirus Crisis—considers certain emergency tax and fiscal policies introduced by certain governments, and describes how tax and fiscal policy can cushion the impact of continued containment and mitigation policies and then support economic recovery. The report also outlines the major policy reforms that will be needed. and Werning (2012) show that fiscal multipliers can be smaller than one if fiscal consolidation leads to internal devaluation necessary to restore competitiveness. Their analysis highlights the need to take into account all initial conditions of a country, such as its degree of competitiveness, when assessing the magnitude of fiscal multipliers
fiscal policy on output for Bulgaria. Most studies that have investigated fiscal multipliers have either focused on advanced economies or employed a panel data approach, thereby providing average fiscal multipliers across countries. Neither of these approaches is tailored to the case of a small open emerging economy Fiscal multipliers appear to vary greatly over time and space. Based on VARs for a large number of countries, we document a strong correlation between wealth inequality and the magnitude of fiscal multipliers. In an attempt to account for this finding, we develop a life-cycle, overlapping-generations economy with uninsurable labor market risk
Fiscal multipliers differ across countries because the structure and behaviour of economies differ. They also differ within countries, depending on factors such as the fiscal instrument implemented, the policy response to fiscal innovations, and expectation formation by economic agents Downloadable! Using non-linear methods, we argue that existing estimates of government spending multipliers in expansion and recession may yield biased results by ignoring whether government spending is increasing or decreasing. In the case of OECD countries, the problem originates in the fact that, contrary to one's priors, it is not always the case that government spending is going up in.
RESUMÉ Fiscal consolidation Part 2. Fiscal multipliers and fiscal consolidations This paper looks at vario aspects of fiscal consolidation in 18 OECD economies. The prospects for fiscal consolidation depend upon the problems the country may face with its debt stock, the political will to deal with these problems and on the costs of consolidation. The analysis is based on a series of. The literature on fiscal multipliers has expanded greatly since the outbreak of the Global Crisis. This column reports on a meta-regression analysis of fiscal multipliers collected from a broad set of empirical reduced form models. Multiplier estimates are significantly higher during economic downturns. Spending multipliers exceed tax multipliers, especially during recessions Downloadable (with restrictions)! Using non-linear methods, we argue that existing estimates of government spending multipliers in expansion and recession may yield biased results by ignoring whether government spending is increasing or decreasing. In the case of OECD countries, the problem originates in the fact that, contrary to one's priors, it is not always the case that government. Sustainable fiscal stance large output gap and low financial frictions, low and negative multipliers otherwise, financial sector amplifies impacts Auerbach and Gorodnichenko (2012a) OECD countries-0.2 (expansion) and 0.5 (recession). Period: 1985 - 2012 (Old OECD members). Mid-1990s - 2012 (New OECD members)
Although not estimating fiscal multipliers, the analysis by Aghion, Hémous and Kharroubi (2014) suggests that firms that are more reliant on external finance may be hit disproportionately by a tightening of fiscal policy. 3. Several studies have challenged the notion of large fiscal multipliers at the zero lower bound. See e largest multiplier. Third, we showed that controlling for real-time predictions of fiscal variables tends to increase the size of the multipliers in recessions. In this paper, we extend our previous analysis in two important ways. First, we estimate multipliers for a large number of OECD countries, rather than just for the United States, agai Fiscal Multipliers in Recessions multipliers in spite of the fact that they give rise to a nancial accelerator. For instance, nds that, in the OECD, scal policy has a larger e ect on consumption in recessions than in expansions; and that this e ect is more pro-nounced in countries that have a less developed consumer credit market In this paper, we estimate government purchase multipliers for a large number of OECD countries, allowing these multipliers to vary smoothly according to the state of the economy and using real-time forecast data to purge policy innovations of their predictable components. We adapt our previous methodology (Auerbach and Gorodnichenko, 2011) to use direct projections rather than the SVAR. multipliers is increasing in the share of public debt that is in the hands of foreigners. This result holds both for the United States during the postwar period, and for a panel of advanced (OECD) economies over the last few decades. According to our estimates the public spending multiplier 1See Ramey (2016) for a recent survey
(Forthcoming Article) - We document that government spending multipliers depend on the population age structure. Using the variation in military spending and birth rates across U.S. states, we show that the local fiscal multiplier is 1.5 and increases with the population share of young people, implying multipliers of 1.1-1.9 in the inter-quartile range estimates of local fiscal multipliers, based on the effects of differential fiscal shocks at lower levels of aggregation within larger entities, e.g., states within the United States or countries within the European Union or the OECD. But the translation of local multipliers into national ones is no
The strength of fiscal multipliers and spillovers have been the subject of intense debate in recent years.Using data on US Department of Defense contracts and income and employment outcomes, this column finds evidence of strong positive spillovers across locations and industries, although the geographical spillovers appear to dissipate fairly quickly with distance New and growing literature on state-contingency of fiscal multipliers Multipliers larger than one suggesting (strong) Keynesian effects (eg Auerbach and Gorodnichenko, 2012,2013; Baum et al., 2012) Financial crises (Corsetti et al, 2012) Zero lower bound literature (eg Woodford, 2011; Christiano et al, 2011) Blanchard and Leigh's IMF working paper Growth Forecast Errors and Fiscal Multipliers (Blanchard and Leigh 2013a, 2013b) and its preceding Box in the IMF World Economic Outlook (IMF 2012) have been widely discussed, and have clearly influenced the policy debate and possibly the policy stance in some countries. For many, the work of Blanchard and Leigh presents convincing evidence that. FISCAL MULTIPLIERS IN JAPAN Alan J. Auerbach and Yuriy Gorodnichenko University of California, Berkeley February 2014 In this paper, we estimate government purchase multipliers for Japan, following the approac
The paper examines the consequences of fiscal consolidation in times of persistently low growth and high unemployment by estimating medium-term fiscal multipliers during protracted recessions (PR) in a sample of 17 OECD countries. Based on Jorda's (2005) local projection methodology, we find that cumulative fiscal multipliers related to output, employment and unemployment at five-year. 8. Outside-Financed Fiscal Multipliers 2456 8.1 Outside-Financed Fiscal Multipliers with No Hand-to-Mouth 2457 8.2 Outside-Financed Fiscal Multipliers with Hand-to-Mouth 2460 9. Taking Stock: Some Summary Multiplier Numbers 2461 10. Country Size, Aggregation, and Foreign Government Spending 2465 10.1 Inflation Targeting at the Union Level 246 Fiscal multipliers and prospects for consolidation. Ray Barrell, Dawn Holland and Ian Hurst. OECD Journal: Economic Studies, 2012, vol. 2012, issue 1, 71-102 . Abstract: This article looks at various aspects of fiscal consolidation in 18 OECD economies. The prospects for fiscal consolidation depend upon the problems a country may face with its debt stock, the political will to deal with these. Third, we allow multipliers to vary across states of the business cycle since our previous analysis of domestic shocks in the United States and the OECD (Auerbach and Gorodnichenko 2012a, 2013, respectively) found such variation impor tant. Fourth, we enhance identification of fiscal shocks by removing predictable innovations i
Table 3 presents the fiscal multipliers for these instruments. The table shows that, depending on the instrument, the sizes of the multipliers range from 0.3 in the case of social benefits to 1.3 for public wages. Thus, as expected, fiscal multipliers for expenditure-based measures are in (absolute terms) higher than those of revenueside measures Fiscal Consolidation: Part 2. Fiscal Multipliers and Fiscal Consolidations - OECD Working Pape government spending, we explore how technology affects sectoral fiscal multipliers in open economy. Our estimates for eighteen OECD countries over 1970-2015 reveal that a government spending shock increases significantly the non-traded-goods-sector share of total hours worked while the response of the value added share of non-tradables (at constant prices) is muted at all horizon
OECD.Stat enables users to search for and extract data from across OECD's many databases geographic cross-sectional fiscal spending multiplier measures the effect of an increase in spending in one region in a monetary union. The past several years have witnessed a wave of new research on such multipliers. By definition, estimation uses variation in fiscal policy across distinct geographic areas in the same calendar period
This paper studies the effects of fiscal policy on GDP, inflation and interest rates in 5 OECD countries, using a structural Vector Autoregression approach. Its main results can be summarized as follows: 1) The effects of fiscal policy on GDP tend to be small: government spending multipliers larger than 1 can be estimated only in the US in the pre-1980 period In economics, the fiscal multiplier (not to be confused with the money multiplier) is the ratio of change in national income arising from a change in government spending.More generally, the exogenous spending multiplier is the ratio of change in national income arising from any autonomous change in spending (including private investment spending, consumer spending, government spending, or.
2 Sectoral Fiscal Multipliers and Technology: Evidence In this section, we document evidence about the role of technology in determining govern-ment spending multipliers on sectoral value added and labor. We flrst establish a set of empirical facts for a sample of eighteen OECD countries and then take advantage of th how fiscal effects vary across lockdown status. In particular, we examine the difference (lockdown versus unrestricted) in differences (expansion versus recession). We add to the body of evidence in support of the slack channel in generating higher fiscal multipliers in recessions, and presen certain assumptions on the size of fiscal multipliers, which are not far from what a number of earlier studies by e.g. the IMF, the OECD and others have estimated for Greece. But, what if the size of fiscal multipliers in the present deep recessionary conditions proves out to be much higher than that assumed b
The paper examines the consequences of fiscal consolidation in times of persistently low growth and high unemployment by estimating medium-term fiscal multipliers during protracted recessions (PR) in a sample of 17 OECD countries. Based on Jorda's (2005) local projection methodology, we find that cumulative fiscal multipliers related to output,employment and unemployment at five-year horizons. Fiscal multipliers appear to vary greatly over time and space. Based on VARs for a large number of countries, we document a strong correlation between wealth inequality and the magnitude of fiscal multipliers. In an attempt to account for this finding, we develop a life-cycle, overlappinggenerations economy with uninsurable labor market risk Fiscal Multiplier: The fiscal multiplier is the ratio of a country's additional national income to the initial boost in spending that led to that extra income
In a panel of OECD countries, we investigate the short-term effects of fiscal consolidation on output and employment, and how these vary with the state of the business cycle, monetary policy, the level of public debt, the current account, and the strength of the financial cycle. The estimation makes use of local projection methods and fiscal consolidation shocks identified through the. First, we present fiscal multipliers for our benchmark model. Second, we explore a potential role for the Euro regarding fiscal multipliers. Finally, we investigate the behaviour of fiscal multipliers in some countries having experienced the Eurozone crisis. 3.1. Fiscal multipliers: the benchmark Eurozone mode fiscal multipliers and fiscal positions while maintaining enough degrees of freedom to draw sharp inferences. The paper reports three major results. First, the fiscal multipli-ers depend on fiscal positions: the multipliers tend to be larger when fiscal positions are strong (i.e. when govern-ment debt and deficits are low) than weak. For instance
