Do Fiscal Multipliers Depend on Fiscal Positions?

Huidrom, Raju ; Kose, M. Ayhan ; Lim, Jamus J. ; Ohnsorge, Franziska L.

World Bank, Washington, DC

关键词: FORECASTS;    GROWTH RATES;    MONETARY POLICY;    RISKS;    ECONOMIC GROWTH;   

DOI  :  10.1596/1813-9450-7724
RP-ID  :  WPS7724

学科分类：社会科学、人文和艺术（综合）

来源: World Bank Open Knowledge Repository

【 摘 要 】

This paper analyzes the relationshipbetween fiscal multipliers and fiscal positions ofgovernments using an Interactive Panel Vector AutoRegression model and a large data-set of advanced anddeveloping economies. The methodology permits tracing theendogenous relationship between fiscal multipliers andfiscal positions while maintaining enough degrees of freedomto draw sharp inferences. The paper reports three majorresults. First, the fiscal multipliers depend on fiscalpositions: the multipliers tend to be larger when fiscalpositions are strong (i.e. when government debt and deficitsare low) than weak. For instance, the long-run multipliercan be as large as unity when the fiscal position is strong,while it can be negative when the fiscal position is weak.Second, these effects are separate and distinct from theimpact of the business cycle on the fiscal multiplier.Third, the state-dependent effects of the fiscal position onmultipliers is attributable to two factors: an interest ratechannel through which higher borrowing costs, due toinvestors' increased perception of credit risks whenstimulus is implemented from a weak initial fiscal position,crowd out private investment; and a Ricardian channelthrough which households reduce consumption in anticipationof future fiscal adjustments.