How Big Are Fiscal Multipliers In Latin America
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How Big Are Fiscal Multipliers In Latin America
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Author : Jorge Restrepo
language : en
Publisher: International Monetary Fund
Release Date : 2020-01-31
How Big Are Fiscal Multipliers In Latin America written by Jorge Restrepo and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2020-01-31 with Business & Economics categories.
This paper uses the strategy and data of Blanchard and Perotti (BP) to identify fiscal shocks and estimate fiscal multipliers for the United States. With these results, it computes the cumulative multiplier of Ramey and Zubairy (2018), now common in the literature. It finds that, contrary to the peak and through multipliers reported by BP, the cumulative tax multiplier is much larger than the cumulative spending one. Hence, the conclusions depend on the definition of multiplier. This methodology is also used to estimate the effects of fiscal shocks on economic activity in eight Latin American countries. The results suggest that the fiscal multipliers vary significantly across countries, and in some cases multipliers are larger than previously estimated.
The Macroeconomic Effects Of Fiscal Consolidation In Emerging Economies Evidence From Latin America
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Author : Mr.Yan Carriere-Swallow
language : en
Publisher: International Monetary Fund
Release Date : 2018-06-13
The Macroeconomic Effects Of Fiscal Consolidation In Emerging Economies Evidence From Latin America written by Mr.Yan Carriere-Swallow and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2018-06-13 with Business & Economics categories.
We estimate the short-term effects of fiscal consolidation on economic activity in 14 countries in Latin America and the Caribbean. We examine contemporaneous policy documents to identify changes in fiscal policy motivated by a desire to reduce the budget deficit and not by responding to prospective economic conditions. Based on this narrative dataset, our estimates suggest that fiscal consolidation has contractionary effects on GDP, consistent with a multiplier of 0.9. We find these effects to be close to those in OECD countries based on a similarly constructed dataset (Devries and others, 2011). We also find similar estimation results for the two groups of economies for the effect of fiscal consolidation on the external current account balance, providing support for the twin deficits hypothesis.
Fiscal Rules And Economic Size In Latin America And The Caribbean
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Author : Fernando Blanco
language : en
Publisher: World Bank Publications
Release Date : 2020-10-10
Fiscal Rules And Economic Size In Latin America And The Caribbean written by Fernando Blanco and has been published by World Bank Publications this book supported file pdf, txt, epub, kindle and other format this book has been release on 2020-10-10 with Business & Economics categories.
Following the collapse of commodity prices in Latin America and the Caribbean (LAC) in 2014-15, many countries in the region were unable to cushion the impact of the shock in order to experience a more gradual adjustment, to a large extent because they had not built adequate fiscal buffers during the commodities’ windfall from 2010-14. Many LAC countries entered 2020 and the COVID-19 crisis in an even more difficult position, with rising debt and limited fiscal space to smooth the negative impacts of the pandemic and adequately support their economies. Fiscal policy in most LAC countries has been procyclical. Public expenditure and debt levels have expanded in good times and contracted in severe downswings due to insufficient fiscal buffers, making crises deeper. Fiscal rules represent a promising policy option for these and other economies. If well-designed and implemented, they can help build buffers during periods of strong economic performance that will be available during rainy days to smooth economic shocks. This book—which was prepared before the COVID-19 crisis—reviews the performance and implementation of different fiscal rules in the region and world. It provides analytical and practical criteria for policy makers for the design, establishment, and feasible implementation of fiscal rules based on each country's business cycle features, external characteristics, type of shocks faced, initial fiscal conditions, technical and institutional capacities, and political context. While establishing new fiscal rules would not help to attenuate the immediate effects of this pandemic crisis, higher debt levels in the aftermath of COVID-19 will demand rebuilding better and stronger institutional frameworks of fiscal policy in LAC and emerging economies globally. Having stronger fiscal mechanisms that include fiscal rules can help countries prepare for the next crisis and should be on the front burner for policy makers in coming years. The findings and lessons discussed apply to economies of different sizes, with some differences under certain scenarios in terms of the technical design and criteria needed for implementation. In this book, policy makers will find that fiscal rules, if tailored to country characteristics, can work and be an essential fiscal tool for larger and particularly smaller economies.
Fiscal Multipliers And Institutions In Peru
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Author : Svetlana Vtyurina
language : en
Publisher: International Monetary Fund
Release Date : 2016-09-07
Fiscal Multipliers And Institutions In Peru written by Svetlana Vtyurina and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2016-09-07 with Business & Economics categories.
With the end of the commodity super cycle, Peru’s potential growth has declined, raising questions of what government policies could do to help boost growth, including over the medium-term. Our econometric analysis shows that public investment multipliers have a larger effect on growth than current spending or tax-related stimulus in the short and medium terms. Peru’s low debt and financial savings grants fiscal space for increasing investment spending, which could also entice and complement private investment, provided the former is efficient, fiscally sustainable and complemented by further reforms in public investment management and changes to the decentralization framework.
Fiscal Policy Effects And Capital Mobility In Some Latin American Countries
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Author : Jose Mora Mora
language : en
Publisher:
Release Date : 2019
Fiscal Policy Effects And Capital Mobility In Some Latin American Countries written by Jose Mora Mora and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2019 with categories.
This paper studies the relationship between the size of the fiscal multiplier and the degree of capital mobility in some Latin American countries. The Mundell (1963) and Fleming (1962) model establishes that this effect might be very large or very small (very close to zero) depending on the exchange rate regime and the degree of capital mobility; the potency of fiscal policy is inversely correlated with the degree of capital mobility. We use Mora (2013) model to argue that the multiplier might not be negatively correlated with capital mobility in these countries. In other words, the potency of fiscal policy could be reduced by the fact that capital mobility in Latin American countries tends to be quite low. The empirical findings support the hypothesis. We have found that the size of the fiscal multiplier tends to increase or (at least) to remain relatively stable, around 1.40, in these countries in the short run; however, in the long run, this effect tends to decrease significantly to 0.34. These results also suggest that fiscal policy is still very potent, but given their economic structure differences, could be larger if Latin American countries become more financially integrated with the rest of the world.
How Big Small Are Fiscal Multipliers
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Author : Ethan Ilzetzki
language : en
Publisher: International Monetary Fund
Release Date : 2011-03-01
How Big Small Are Fiscal Multipliers written by Ethan Ilzetzki and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2011-03-01 with Business & Economics categories.
We contribute to the intense debate on the real effects of fiscal stimuli by showing that the impact of government expenditure shocks depends crucially on key country characteristics, such as the level of development, exchange rate regime, openness to trade, and public indebtedness. Based on a novel quarterly dataset of government expenditure in 44 countries, we find that (i) the output effect of an increase in government consumption is larger in industrial than in developing countries, (ii) the fisscal multiplier is relatively large in economies operating under predetermined exchange rate but zero in economies operating under flexible exchange rates; (iii) fiscal multipliers in open economies are lower than in closed economies and (iv) fiscal multipliers in high-debt countries are also zero.
Fiscal Policy Multipliers In Small States
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Author : Ali Alichi
language : en
Publisher: International Monetary Fund
Release Date : 2019-03-26
Fiscal Policy Multipliers In Small States written by Ali Alichi and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2019-03-26 with Business & Economics categories.
Government debt in many small states has risen beyond sustainable levels and some governments are considering fiscal consolidation. This paper estimates fiscal policy multipliers for small states using two distinct models: an empirical forecast error model with data from 23 small states across the world; and a Dynamic Stochastic General Equilibrium (DSGE) model calibrated to a hypothetical small state’s economy. The results suggest that fiscal policy using government current primary spending is ineffective, but using government investment is very potent in small states in affecting the level of their GDP over the medium term. These results are robust to different model specifications and characteristics of small states. Inability to affect GDP using current primary spending could be frustrating for policymakers when an expansionary policy is needed, but encouraging at the current juncture when many governments are considering fiscal consolidation. For the short term, however, multipliers for government current primary spending are larger and affected by imports as share of GDP, level of government debt, and position of the economy in the business cycle, among other factors.
Growth Forecast Errors And Fiscal Multipliers
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Author : Mr.Olivier J. Blanchard
language : en
Publisher: International Monetary Fund
Release Date : 2013-01-03
Growth Forecast Errors And Fiscal Multipliers written by Mr.Olivier J. Blanchard and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2013-01-03 with Business & Economics categories.
This paper investigates the relation between growth forecast errors and planned fiscal consolidation during the crisis. We find that, in advanced economies, stronger planned fiscal consolidation has been associated with lower growth than expected, with the relation being particularly strong, both statistically and economically, early in the crisis. A natural interpretation is that fiscal multipliers were substantially higher than implicitly assumed by forecasters. The weaker relation in more recent years may reflect in part learning by forecasters and in part smaller multipliers than in the early years of the crisis.
The Effectiveness Of Fiscal Policy In Stimulating Economic Activity
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Author : Richard Hemming
language : en
Publisher: International Monetary Fund
Release Date : 2002-12
The Effectiveness Of Fiscal Policy In Stimulating Economic Activity written by Richard Hemming and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2002-12 with Business & Economics categories.
This paper reviews the theoretical and empirical literature on the effectiveness of fiscal policy. The focus is on the size of fiscal multipliers, and on the possibility that multipliers can turn negative (i.e., that fiscal contractions can be expansionary). The paper concludes that fiscal multipliers are overwhelmingly positive but small. However, there is some evidence of negative fiscal multipliers.
Estimating Fiscal Multipliers Under Alternative Exchange Rate Regimes The Case Of Bolivia
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Author : Tannous Kass-Hanna
language : en
Publisher: International Monetary Fund
Release Date : 2023-11-17
Estimating Fiscal Multipliers Under Alternative Exchange Rate Regimes The Case Of Bolivia written by Tannous Kass-Hanna and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2023-11-17 with Business & Economics categories.
Empirical (employing the Blanchard-Perotti framework) and modeling (using a country-specific DSGE model) approaches are used to estimate fiscal multipliers by policy instrument for Bolivia, to evaluate possible adjustments in a fiscal consolidation strategy. Multipliers are also estimated using alternative assumptions about the accompanying exchange rate regime and capital mobility, highlighting the importance of the policy mix in determining the impact of fiscal adjustments. The study exploits the DSGE modeling structure to assess this interaction of fiscal and monetary policy in a lower middle-income country under different exchange rate regimes. It finds that expenditure multipliers fall into the range of 1/3 to 2/3, with public investment multipliers slightly higher than government consumption multipliers over longer horizons, and multipliers generally higher under a peg than inflation targeting. Tax multipliers are shown to be about half of expenditure multipliers.