Fiscal Multipliers

L’objectif de ce travail est de quantifier les multiplicateurs budgétaires au sein des économies de la CEMAC. Cet article vient ainsi apporter un éclairage sur les effets des dépenses publiques sur l’activité économique de cette sous-région dans un contexte de crise économique. A l’aide d’une modélisation VAR structurel en panel avec exogène (SPVAR-X) d’une part et de la technique de projection locale développée par Jordá (2005) d’autre part, il a été mis en évidence que les multiplicateurs budgétaires dans la CEMAC sont relativement faibles, mais varient selon la position du cycle économique. Ainsi, on note à l’échelle de la sous-région un multiplicateur des dépenses totales estimé à 0,08 et un multiplicateur de long terme de 0,51. En tenant compte de la typologie des dépenses, on observe que, le multiplicateur de dépenses de consommation est plus important que celui des dépenses d’investissement, probablement en raison de l’inefficience des dépenses d’investissement et des caractéristiques du secteur productif. Toutefois, les valeurs des différents multiplicateurs sont plus élevées en phase de récession qu’en phase d’expansion, ce qui suggère que la conduite de politiques budgétaires contracycliques est souhaitable dans la CEMAC. Ces résultats contribuent à éclairer le débat sur l’élaboration et la conduite des politiques d’ajustement budgétaire initiées dans CEMAC.

This paper analyses the relation between fiscal policy and economic growth in Brazil from 2002 to 2016. It is shown that the country's macro regime was inspired on the " New Neoclassical Synthesis " theory, where fiscal policy has no role on stimulating economic activity, while there is a major focus on price stability through monetary policy. In Brazil, economic performance has deteriorated since 2011, when growth rates have gradually slowdown, until a major recession has taken place in 2015 and 2016. In order to understand the government capacity of stimulating growth through fiscal policy, a Structural Vector Auto-Regressive (SVAR) model is applied to the Brazilian economy in order to analyze the impact of different government expenditures, taxation and also the public debt, on economic growth. Resumo Este trabalho analisa a relação entre política fiscal e crescimento econômico no Bra-sil entre 2002 e 2016. Procura-se demonstrar que no regime macroeconômico brasileiro, inspirado no modelo da Nova Síntese Neoclássica, a política fiscal não tem papel ativo no estímulò a demanda agregada, enquanto o controle de preços via política monetária ´ e o principal instrumento macroconômico. No Brasil, após a continúa desaceleração do crescimento econômico a partir de 2011, observou-se dois anos recessivos consecutivos, 1 em 2015 e 2016. A fim de compreendera capacidade do governo em estimular o cresci-mento econômico, neste trabalho estima-se um modelo de Vector Autoregressivo Estru-tural (SVAR), onde analisa-se o impacto dos gastos, da tributação e da dívida pública na dinâmica do PIB.

The Great Recession has led to renewal interests in Keynesian economics. In a first time, Keynesian remedies, consisting in increased public spending during the slump so as to avoid depression, have been applied. But, in a second time, especially in the eurozone, international organizations (IMF, OECD, European Commission) have advocated fiscal austerity in order to deal with the so-called sovereign debt crisis. Confronted with the brutal economic slowdown following the fiscal tightening, these international organizations suddenly realized that the value of Keynesian multipliers was bigger than expected, and so that austerity policies led to recession harder than expected. Then, numerous studies tried to explain why Keynesian multipliers are bigger in recession.
This paper weighs in this debate while suggesting a plausible explanation, based on simple Keynesian macroeconomics. To put it in a nutshell, it seems to us that the main cause of increased multipliers in recession refers to a drop in import propensities.
In a first part, we provide historical data showing how import propensities have declined during recessions. Then, in a second part, we build our explanation for this reduction in import propensities, while using the works of Thomas Palley, Albert Aftalion and Luigi Pasinetti. From Thomas Palley, we use his decomposition of the multiplier according to imports’ utilizations in aggregate demand. From Albert Aftalion, we use his accelerator model for investment. From Pasinetti, we use his saving equation with different propensities to consume out of incomes according to social groups. Thanks to the combination of these three authors, we are able to explain why the propensity to import is lesser during a recession, and so why the multipliers are bigger in hard times.

The recent sovereign debt crisis had raised many questions about the use of discretionary stabilization policies, with particular relevance to fiscal policy orientation and its macroeconomic impacts, mainly in a context of high public indebtedness. This discussion is particularly relevant for the European Union (EU) case where, despite the set of rules imposed by the Stability and Growth Pact, it was not possible to ensure budgetary discipline on a broad set of countries.
This essay aims to understand how fiscal multipliers change in the presence of fiscal rules, especially in a high public debt environment. With this study, we aim to contribute to the existing literature in terms of: i) a critical review of the transmission mechanisms of fiscal policy, with particular emphasis to situations of high public debt and ii) an empirical evaluation, applied to Europe, of the impact of different types of fiscal rules on the value of fiscal multipliers, especially in a context of high public debt-to-output levels.
The results obtained through VAR estimation, for 26 EU countries and covering the period 1993-2008, show that high public debt has a nonlinear impact on fiscal multipliers. The effect on the expenditure-side multiplier reaches its maximum for public debt around 70-80% of GDP; above this threshold, the multiplier decreases, observing negative values when debt exceeds 110% of GDP. Fiscal rules, in turn, impact positively spending multipliers (except for public investment), while a positive effect is only verified for tax multipliers when a debt rule is used. It was also observed that the impact of fiscal rules on fiscal multipliers is positive when public debt is high, even though, for public debt levels rise above 105% of GDP, this effect decreases, which may predict a decrease of fiscal rules effectiveness, as debt increases to very high levels.

La causalidad entre gasto público y crecimiento no está claramente definida. Por un lado se analiza el comportamiento del gasto público a lo largo del ciclo económico. En este sentido, la causalidad iría desde el producto bruto interno hacia el gasto público (análisis de ciclicidad). Por otro lado, un incremento del gasto público puede incrementar el PBI vía efecto multiplicador (causalidad inversa). Diversos estudios analizan ambas cuestiones. En el presente trabajo se intentará analizar la efectividad de la política fiscal argentina en términos de crecimiento, considerando que la causalidad va en ambas direcciones. Para analizar la política fiscal se tendrá en cuenta la fase del ciclo económico y el tipo de gasto público realizado (distinguiendo entre gasto corriente y gasto de capital).

The Great Depression of the 1930s and the Great Credit Crisis of the 2000s had similar causes but elicited strikingly different policy responses. While it remains too early to assess the effectiveness of current policy, it is possible to analyse monetary and fiscal responses in the 1930s as a natural experiment or counterfactual capable of shedding light on the impact of current policies. We employ vector autoregressions, instrumental variables, and qualitative evidence for 27 countries in the period 1925–39. The results suggest that monetary and fiscal stimulus was effective – that where it did not make a difference it was not tried. They shed light on the debate over fiscal multipliers in episodes of financial crisis. They are consistent with multipliers at the higher end of those estimated in the recent literature, and with the argument that the impact of fiscal stimulus will be greater when banking systems are dysfunctional and monetary policy is constrained by the zero bound.

Should the government spend less, or spend more? This paper examines different arguments for fiscal contraction and fiscal expansion, considering the level of indebtedness of a country and the economic circumstances. It finds that high debt-to-GDP ratios are a burden on the economy that represent a progressive cost to government deficit, which it captures through introducing the concept of a debt multiplier. It also finds that recessions strongly increase the benefits of fiscal spending, both in the short-run and in the long-run through hysteresis-effects. Furthermore, it shows that taking into account international fiscal spillovers has a significant impact on the choice of fiscal policy, and that international policy coordination can prevent serious policy mistakes. The paper formulates a new non-ideological paradigm for thinking about fiscal policy that incorporates arguments for fiscal spending and fiscal contraction alike. It postulates that the net effect of fiscal policy can be captured using a cost-benefit approach that takes into account these varying costs and benefits of fiscal policy, and proposes a new model of fiscal policy based on this approach. The model is empirically tested for the countries of the Euro Area and yields some surprising results that pulls into question many widely held opinions on optimal fiscal policy for different countries. The analysis shows that optimal fiscal policy varies greatly from country to country and from year to year, and relies on a pragmatic and internationally oriented approach that objectively evaluates each country’s individual circumstances.

We estimate the dynamic multiplier effect of public investment in Spain. To this aim, we employ annual data of the seventeen Spanish Autonomous Communities for the 1980-2016 period. We disaggregate public investment in productive infrastructure investment, INFINV, and in social investment, SOCINV. Thus, we analyze the dynamic multiplier effect of INFINV and that of SOCINV. Our findings suggest that an increase in the level of public investment generates a positive and permanent effect on the level of GDP. One year after the fiscal expansion, the dynamic fiscal multipliers of INFINV and SOCINV reach values above one, thereby confirming that government public investment expansions have Keynesian effects on the level of output. We also find that the value of the dynamic multipliers is asymmetric when we consider above-average-GDPpc and below-average-GDPpc Autonomous Communities.

Multiplier processes and the calculation for multiplier ratios depend on the state of the economy, and this essay will cover three cases: an economy stuck in a deep recession, an economy experiencing full-employment levels, and an economy in between those two extremes. These cases were each assigned to their respective range in the SRAS curve: Keynesian range, classical range, and intermediate range respectively.

Dynamic stochastic general equilibrium (DSGE) models are known as a flexible tool for monetary policy
analysis. Nowadays this approach is becoming more popular for the analysis of fiscal policy impact on
economic development. There are few DSGE models of Russian economy with detailed fiscal sector. In
this study a simple DSGE model is developed and calibrated to evaluate the efficiency of fiscal stimulus.
In addition, the authors consider the impact of budget consolidation and public-private consumption
relationship on fiscal multipliers. The results demonstrate the sensitivity of multipliers to certain
parameters. The developed model will form the basis of further research within suggested framework.

Macroeconomics is grounded in microeconomics and uses mathematical models to simplify and illustrate complex processes, learning it can be difficult. And because of this, macroeconomic-principles textbooks fail to connect topics and models in a concise, cohesive, and meaningful way.

This book overcomes these shortcomings with better topic selection and organization by building a model of the macro-economy, and utilizing a single hypothetical numerical example throughout the book to teach you the key principles. Keynesian economics, a school of economic thought based on the views of the British economist John Maynard Keynes (1883 to 1946), is used to construct the model of the macro-economy because it is elegant, simplistic, intuitive, and politicians apply it when enacting stimulus bills. (That said, the book is not an endorsement of Keynesian economics, nor does it suggest that mathematical modeling is the quintessential element of economic analysis.)

This book allows you (whether business executive, graduate or undergraduate student, or policy maker) to gain a fuller understanding of how the macro-economy reacts to economic shocks and policy changes from several economic perspectives.

This book is organized into three parts. Chapters 1 and 2 lay the foundation of the aggregate market model that is constructed in Chapters 3 and 4. After this model is assembled using data, Keynesian economics, and simple linear equations, it is analyzed using hypothetical numerical values to understand how the macro-economy responds to economic shocks and policy changes. To aid in performing these numerical analyses, I have written several EXCEL simulations that can be downloaded from www.halsnarr.com/teaching.htm. The model is then used to study the effectiveness of fiscal policy in Chapter 5 from different schools of economic thought. In Chapter 6, money, banking, and monetary policy are introduced, analyzed, and evaluated. After evaluating mainstream economics, in the context of the 2008 financial collapse and subsequent recovery, Chapter 7 presents and analyzes an alternative model of the macro-economy developed by Austrian macroeconomist Roger Garrison (2001).

Tytell, the staff at the National Library of Ireland, two anonymous referees, and the editor, Philippe Martin. The views expressed herein are those of the author(s) and do not necessarily reflect the views of the National Bureau of Economic Research. NBER working papers are circulated for discussion and comment purposes. They have not been peerreviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.

This paper investigates the interaction between fiscal policy transmission and
fiscal sustainability, captured through the concept of fiscal space. In order to measure the
evolution of fiscal space over time we propose four indicators, drawing from
different concepts available in the literature. We use these indicators to define periods of
ample and tight fiscal space. We then estimate the effects of government spending
shocks in the United States according to the level of fiscal space, for the period
1929:Q1-2015:Q4. The main finding of the paper is that the fiscal multiplier is above one
when fiscal space is ample, while it is below one when fiscal space is tight. Moreover, such
difference is always significant. This result is very robust across different identification
methods and samples.

This paper presents the design and implementation of radix-8 booth Multiplier .The number of partial products are reduced to n/2 in radix-4We can reduce the number of partial products even further to n/3 by using a higher radix-8 in the multiplier encoding, thereby obtaining a simpler CSA tree .This implies less delay and a smaller area size .Since this multiplication operation is for both signed and unsigned numbers,cost of the system can also be reduced. The carry save adder (CSA) tree and the final adder can speed up the operation of multiplier. Koggestone adder is a parallel prefix form carry look ahead adder .We determine that by replacing carry save adder(CSA) and final two operand parallel prefix adder with parallel prefix adders of koggestone algorithm reduces delay furthur more resulting in substantial increase in speed of circuits.

The recent sovereign debt crisis had raised many questions about the use of discretionary stabilization policies, with particular relevance to fiscal policy orientation and its macroeconomic impacts, mainly in a context of high public indebtedness. This discussion is particularly relevant for the European Union (EU) case where, despite the set of rules imposed by the Stability and Growth Pact, it was not possible to ensure budgetary discipline on a broad set of countries. This essay aims to understand how fiscal multipliers change in the presence of fiscal rules, especially in a high public debt environment. With this study, we aim to contribute to the existing literature in terms of: i) a critical review of the transmission mechanisms of fiscal policy, with particular emphasis to situations of high public debt and ii) an empirical evaluation, applied to Europe, of the impact of different types of fiscal rules on the value of fiscal multipliers, especially in a context of high public debtto-output levels. Fiscal rules, in turn, impact positively spending multipliers (except for the public investment), while a positive effect is only verified for tax multipliers when a debt rule is used. The results obtained through VAR estimation, for 26 EU countries and covering the period 1993-2008, show that high public debt has a nonlinear impact on fiscal multipliers. The effect on the expenditure-side multiplier reaches its maximum for public debt around 70-80% of GDP; above this threshold, the multiplier decreases, observing negative values when debt exceeds 110% of GDP. Fiscal rules, in turn, impact positively spending multipliers (except for public investment), while a positive effect is only verified for tax multipliers when a debt rule is used. It was also observed that the impact of fiscal rules on fiscal multipliers is positive when public debt is high, even though, for public debt levels rise above 105% of GDP, this effect decreases, which may predict a decrease of fiscal rules effectiveness, as debt increases to very high levels.

Macroeconomics is grounded in microeconomics and uses mathematical models to simplify and illustrate complex processes, learning it can be difficult. And because of this, macroeconomic principles textbooks fail to connect topics and models in a concise, cohesive, and meaningful way. This book is a part of a series that recognizes that the intense competition among emerging markets and against advanced economies to capture their share of the global economy. Most important to this end is the study and practice of international business and foreign trade.

Using the augmented version of the BlanchardPerotti's SVAR technique, this paper seeks to empirically estimate the size of fiscal multipliers in Turkey over the period 2002:q3-2016:q2. In contrast to many previous papers that concentrate on fiscal policy instruments taxes and government spending at the aggregate level, in the paper we consider these instruments at the sub-component level. We examine output responses to discretionary changes in five fiscal variables (value-added tax, special consumption tax, personal income tax, real government spending, and transfer payments), and then we estimate the size of fiscal multipliers for taxes and government spending. Overall, our empirical findings indicate that the size of multipliers for taxes is different from that of government spending. Depending on the sub-components, the size of the multiplier ranges from-0.83 to-0.27 for taxes, and from 0.02 to 0.98 for government spending respectively. Overall, these findings corroborate the idea that a shock to government spending creates a (weak) Keynesian effect on GDP in the short run, while a shock to taxes brings about a non-Keynesian effect.

Des idées pourtant démenties par les faits peuvent continuer à se propager... L'économie est une discipline dans laquelle ce phénomène se produit régulièrement, pouvant provoquer in fine des effets délétères sur la société. Dans ce texte, il est rappelé que les économistes devraient combattre la "zombification" des idées économiques.