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| Author | : Eric M. Leeper |
| Publisher | : International Monetary Fund |
| Total Pages | : 65 |
| Release | : 2012-06-01 |
| Genre | : Business & Economics |
| ISBN | : 1475558244 |
Download Fiscal Foresight and Information Flows Book in PDF, ePub and Kindle
News - or foresight - about future economic fundamentals can create rational expectations equilibria with non-fundamental representations that pose substantial challenges to econometric efforts to recover the structural shocks to which economic agents react. Using tax policies as a leading example of foresight, simple theory makes transparent the economic behavior and information structures that generate non-fundamental equilibria. Econometric analyses that fail to model foresight will obtain biased estimates of output multipliers for taxes; biases are quantitatively important when two canonical theoretical models are taken as data generating processes. Both the nature of equilibria and the inferences about the effects of anticipated tax changes hinge critically on hypothesized information flows. Different methods for extracting or hypothesizing the information flows are discussed and shown to be alternative techniques for resolving a non-uniqueness problem endemic to moving average representations.
| Author | : Eric M. Leeper |
| Publisher | : |
| Total Pages | : 45 |
| Release | : 2011 |
| Genre | : Economics |
| ISBN | : |
Download Foresight and Information Flows Book in PDF, ePub and Kindle
Abstract: News--or foresight--about future economic fundamentals can create rational expectations equilibria with non-fundamental representations that pose substantial challenges to econometric efforts to recover the structural shocks to which economic agents react. Using tax policies as a leading example of foresight, simple theory makes transparent the economic behavior and information structures that generate non-fundamental equilibria. Econometric analyses that fail to model foresight will obtain biased estimates of output multipliers for taxes; biases are quantitatively important when two canonical theoretical models are taken as data generating processes. Both the nature of equilibria and the inferences about the effects of anticipated tax changes hinge critically on hypothesized tax information flows. Differential U.S. federal tax treatment of municipal and treasury bonds embeds news about future taxes in bond yield spreads. Including that measure of tax news in identified VARs produces substantially different inferences about the macroeconomic impacts of anticipated taxes
| Author | : Sangyup Choi |
| Publisher | : International Monetary Fund |
| Total Pages | : 60 |
| Release | : 2019-07-12 |
| Genre | : Business & Economics |
| ISBN | : 1513507915 |
Download International Fiscal-financial Spillovers: The Effect of Fiscal Shocks on Cross-border Bank Lending Book in PDF, ePub and Kindle
This paper sheds new light on the degree of international fiscal-financial spillovers by investigating the effect of domestic fiscal policies on cross-border bank lending. By estimating the dynamic response of U.S. cross-border bank lending towards the 45 recipient countries to exogenous domestic fiscal shocks (both measured by spending and revenue) between 1990Q1 and 2012Q4, we find that expansionary domestic fiscal shocks lead to a statistically significant increase in cross-border bank lending. The magnitude of the effect is also economically significant: the effect of 1 percent of GDP increase (decrease) in spending (revenue) is comparable to an exogenous decline in the federal funds rate. We also find that fiscal shocks tend to have larger effects during periods of recessions than expansions in the source country, and that the adverse effect of a fiscal consolidation is larger than the positive effect of the same size of a fiscal expansion. In contrast, we do not find systematic and statistically significant differences in the spillover effects across recipient countries depending on their exchange rate regime, although capital controls seem to play some moderating role. The extension of the analysis to a panel of 16 small open economies confirms the finding from the U.S. economy.
| Author | : Ľudovít Ódor |
| Publisher | : Cambridge University Press |
| Total Pages | : 615 |
| Release | : 2017-05-18 |
| Genre | : Business & Economics |
| ISBN | : 1107160588 |
Download Rethinking Fiscal Policy after the Crisis Book in PDF, ePub and Kindle
After the financial crisis, what important lessons can we learn from fiscal policy? This book provides an answer to this question.
| Author | : Nicoletta Batini |
| Publisher | : International Monetary Fund |
| Total Pages | : 75 |
| Release | : 2020-06-05 |
| Genre | : Business & Economics |
| ISBN | : 1513546082 |
Download How Loose, How Tight? A Measure of Monetary and Fiscal Stance for the Euro Area Book in PDF, ePub and Kindle
This paper builds a model-based dynamic monetary and fiscal conditions index (DMFCI) and uses it to examine the evolution of the joint stance of monetary and fiscal policies in the euro area (EA) and in its three largest member countries over the period 2007-2018. The index is based on the relative impacts of monetary and fiscal policy on demand using actual and simulated data from rich estimated models featuring also financial intermediaries and long-term government debt. The analysis highlights a short-lived fiscal expansion in the aftermath of the Global Financial Crisis, followed by a quick tightening, with monetary policy left to be the “only game in town” after 2013. Individual countries’ DMFCIs show that national policy stances did not always mirror the evolution of the aggregate stance at the EA level, due to heterogeneity in the fiscal stance.
| Author | : Emilio Colombo |
| Publisher | : International Monetary Fund |
| Total Pages | : 73 |
| Release | : 2022-05-06 |
| Genre | : Business & Economics |
| ISBN | : |
Download Fiscal Multipliers and Informality Book in PDF, ePub and Kindle
This paper investigates the role of informality in affecting the magnitude of the fiscal multiplier in a panel of 141 countries, using the local projections method. We find a strong negative relationship between the degree of informality and the size of the fiscal multiplier. This result holds irrespective of the levels of economic development and institutional quality and is robust to additional country characteristics such as trade, financial openness and exchange rate regime. In a two-sector new- Keynesian model, we rationalize this result by showing that fiscal shocks raise the relative price of official goods, shifting demand towards the informal sector. This reallocation effect increases with the level of informality, because a larger informal sector is associated with a stronger appreciation of relative prices in response to fiscal shocks. Thus, informality raises the size of the unofficial multiplier. A higher degree of non-separability between public and private goods also contributes to rationalize the lower multipliers in high-informality countries.
| Author | : Mario di Serio |
| Publisher | : International Monetary Fund |
| Total Pages | : 30 |
| Release | : 2021-02-12 |
| Genre | : Business & Economics |
| ISBN | : 1513569511 |
Download The Impact of r-g on the Euro-Area Government Spending Multiplier Book in PDF, ePub and Kindle
We compute government spending multipliers for the Euro Area (EA) contingent on the interestgrowth differential, the so-called r-g. Whether the fiscal shock occurs when r-g is positive or negative matters for the size of the multiplier. Median estimates vary conditional on the specification, but the difference between multipliers in the negative and positive r-g regimes differs systematically from zero with very high probability. Over the medium run (5 years), median cumulated multipliers range between 1.22 and 1.77 when r-g is negative, and between 0.51 and 1.26 when r-g is positive. We show that the results are not driven by the state of the business cycle, the monetary policy stance, or the level of government debt, and that the multiplier is inversely correlated with r-g. The calculations are based on the estimates of a factor-augmented interacted panel vector-autoregressive model. The econometric approach deals with several technical problems highlighted in the empirical macroeconomic literature, including the issues of fiscal foresight and limited information.
| Author | : Alexandra Fotiou |
| Publisher | : International Monetary Fund |
| Total Pages | : 54 |
| Release | : 2020-05-29 |
| Genre | : Business & Economics |
| ISBN | : 1513545868 |
Download The Fiscal State-Dependent Effects of Capital Income Tax Cuts Book in PDF, ePub and Kindle
Using the post-WWII data of U.S. federal corporate income tax changes, within a Smooth Transition VAR, this paper finds that the output effect of capital income tax cuts is government debt-dependent: it is less expansionary when debt is high than when it is low. To explore the mechanisms that can drive this fiscal state-dependent tax effect, the paper uses a DSGE model with regime-switching fiscal policy and finds that a capital income tax cut is stimulative to the extent that it is unlikely to result in a future fiscal adjustment. As government debt increases to a sufficiently high level, the probability of future fiscal adjustments starts rising, and the expansionary effects of a capital income tax cut can diminish substantially, whether the expected adjustments are through a policy reversal or a consumption tax increase. Also, a capital income tax cut need not always have large revenue feedback effects as suggested in the literature.
| Author | : Patrick Blagrave |
| Publisher | : International Monetary Fund |
| Total Pages | : 32 |
| Release | : 2018-05-09 |
| Genre | : Business & Economics |
| ISBN | : 1484356152 |
Download Cross-Border Transmission of Fiscal Shocks: The Role of Monetary Conditions Book in PDF, ePub and Kindle
Fiscal stimulus was widely advocated during the global crisis, a period characterized by monetary policy constrained by the effective lower bound (ELB) in many countries, in part because of expected positive spillovers. Standard New Keynesian models predict the cross-border transmission of fiscal shocks is stronger when monetary policy is constrained in recipients. However, the empirical evidence is scarce. This paper bridges this gap by looking at the impact of fiscal shocks in systemic (source) economies on output and demand components in a large group of (recipient) countries, under different monetary policy conditions. Empirical results are compared to simulations with a state-of-the-art estimated open-economy New Keynesian model. Our results corroborate model predictions, finding larger spillovers when recipients are at the ELB, driven by stronger responses of investment and consumption relative to normal times
| Author | : Patrick Blagrave |
| Publisher | : International Monetary Fund |
| Total Pages | : 31 |
| Release | : 2017-10-18 |
| Genre | : Business & Economics |
| ISBN | : 1484352416 |
Download Fiscal Spillovers Book in PDF, ePub and Kindle
Are fiscal spillovers today as large as they were during the global financial crisis? How do they depend on economic and policy conditions? This note informs the debate on the cross-border impact of fiscal policy on economic activity, shedding light on the magnitude and the factors affecting transmission, such as the fiscal instruments used, cyclical positions, monetary policy conditions, and exchange rate regimes. The note assesses spillovers from five major advanced economies (France, Germany, Japan, United Kingdom, United States) on 55 advanced and emerging market economies that represent 85 percent of global output, looking at government-spending and tax revenue shocks during expansion and consolidation episodes. It finds that fiscal spillovers are economically significant in the presence of slack and/or accommodative monetary policy—and considerably smaller otherwise, which suggests that spillovers are large when domestic multipliers are also large. It also finds that spillovers from government-spending shocks are larger and more persistent than those from tax shocks and that transmission may be stronger among countries with fixed exchange rates. The evidence suggests that although spillovers from fiscal policies in the current environment may not be as large as they were during the crisis, they may still be important under certain economic circumstances.
