Fiscal Multipliers over the Growth Cycle : Evidence from Malaysia

Rafiq, Sohrab ; Zeufack, Albert

关键词: ACCELERATOR;    ACCESS TO INFORMATION;    AGENCY PROBLEM;    AGGREGATE DEMAND;    AGGREGATE SUPPLY;   

DOI  :  10.1596/1813-9450-5982
RP-ID  :  WPS5982

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 explores the stabilisationproperties of fiscal policy in Malaysia using a modelincorporating nonlinearities into the dynamic relationshipbetween fiscal policy and real economic activity over thegrowth cycle. The paper also investigates how outputmultipliers for government purchases may alter for differentcomponents of government spending. The authors find thatfiscal policy in Malaysia has become increasinglypro-cyclical over the last 25 years and establish that thesize of fiscal multipliers tend to change over the growthcycle. A 1 Malaysian Ringgit rise in government (investment)spending leads to a maximum output multiplier of around 2.7during growth recessions, and around 2 in normal times. Thereturns to government spending in Malaysia are greater whenthe focus is on public investment, as opposed toconsumption. Changes in tax policy are less effective instimulating economic activity than direct governmentspending. These results provide empirical backing toconjectures in the recent literature implying thatprocyclicality in fiscal policy reduces the effectiveness offiscal actions in emerging markets.