Stimulus and Fiscal Consolidation: The Evidence and Implications
| Author | : Dean Baker |
| Publisher | : |
| Total Pages | : |
| Release | : 2014 |
| Genre | : |
| ISBN | : |
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From Stimulus to Consolidation
| Author | : Juan Toro R. |
| Publisher | : International Monetary Fund |
| Total Pages | : 122 |
| Release | : 2010-10-06 |
| Genre | : Business & Economics |
| ISBN | : 1455217611 |
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This paper identifies policy tools that could be used for fiscal consolidation in advanced and emerging economies in the years ahead. The consolidation strategy, particularly in advanced countries, should aim to stabilize age-related spending in relation to GDP, reduce non-age-related expenditure ratios, and increase revenues. Bold reforms are needed to offset projected increases in age-related spending, particularly health care. On the revenue side, measures could include improving tax compliance, for example through better international cooperation, as well as increasing the yield from VAT by eliminating exemptions and reduced rates, further developing property taxes, and increasing excise rates within the range of rates already applicable in comparable countries.
How Big (Small?) are Fiscal Multipliers?
| Author | : Ethan Ilzetzki |
| Publisher | : International Monetary Fund |
| Total Pages | : 68 |
| Release | : 2011-03-01 |
| Genre | : Business & Economics |
| ISBN | : 1455218022 |
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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.
The Effectiveness of Fiscal Policy in Stimulating Economic Activity
| Author | : Richard Hemming |
| Publisher | : International Monetary Fund |
| Total Pages | : 60 |
| Release | : 2002-12 |
| Genre | : Business & Economics |
| ISBN | : |
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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.
The Economic Effects of Fiscal Consolidation with Debt Feedback
| Author | : Mr.Marcello M. Estevão |
| Publisher | : International Monetary Fund |
| Total Pages | : 51 |
| Release | : 2013-05-31 |
| Genre | : Business & Economics |
| ISBN | : 1484304489 |
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The past several years of recession and slow recovery have raised much interest on the effect of fiscal stimulus on economic activity, even as high public debts in many countries would call for fiscal consolidation. To evaluate the delicate balance between stimulus and consolidation requires measuring the size of fiscal multipliers, which often depends on having quarterly data so that exogenous fiscal policy shocks can be identified. We estimate fiscal multipliers using a novel methodology for identifying fiscal shocks within a structural vector autoregressive approach using annual data while controling for debt feedback effects. The estimation focuses on regions with scarce quarterly data (mostly low-income countries), and uses results for advanced economies, emerging market countries, and other broad groupings for which alternative estimates are available to validate the methodology. Differently from advanced and emerging market economies, fiscal consolidation in low-income countries has only a small temporary negative effect on growth while raising medium-term output. Shifting the composition of public spending toward capital expenditure further supports long-run growth.
Growth Forecast Errors and Fiscal Multipliers
| Author | : Mr.Olivier J. Blanchard |
| Publisher | : International Monetary Fund |
| Total Pages | : 43 |
| Release | : 2013-01-03 |
| Genre | : Business & Economics |
| ISBN | : 1475576447 |
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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.
Fiscal Policies in EMU Countries
| Author | : Francesco Forte |
| Publisher | : |
| Total Pages | : |
| Release | : 2016 |
| Genre | : |
| ISBN | : |
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Purpose - The aim of the paper is to evaluate fiscal adjustments that have occurred in the Economic and Monetary Union (EMU) countries in the last 35 years, and their consequences on the economic growth process by using the mean group (MG) estimators.Design/methodology/approach - Our emphasis is on the effects of different composition of fiscal stimuli and consolidations. We compare the effects on the economic growth rate of different compositions of major fiscal changes. We use a cyclically adjusted value of the fiscal variables to leave aside variations of the fiscal variables induced by business cycle fluctuations.Findings - Our empirical research of the effects of large changes in fiscal policy, both in case of a fiscal consolidation and of fiscal stimulus in the 18EMUcountries from 1980 to 2015, shows that adjustments by cutting current expenditures, rather than by tax increases are more likely to boost economic growth. It also shows that cuts of investment expenditures may reduce GDP growth. During fiscal stimulus episodes, tax cuts and public investments are more likely to increase growth than current public expenditure.Originality/value - This is the first study devoted to the EMU countries. It should be underlined that the results obtained as for EMU countries are not necessarily applicable to other countries, as the different government size as well as different market institutions may influence the results.
Macroeconomic Effects of Tax Rate and Base Changes: Evidence from Fiscal Consolidations
| Author | : Ms.Era Dabla-Norris |
| Publisher | : International Monetary Fund |
| Total Pages | : 47 |
| Release | : 2018-09-28 |
| Genre | : Business & Economics |
| ISBN | : 1484377451 |
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This paper examines the macroeconomic effects of tax changes during fiscal consolidations. We build a new narrative dataset of tax changes during fiscal consolidation years, containing detailed information on the expected revenue impact, motivation, and announcement and implementation dates of nearly 2,500 tax measures across 10 OECD countries. We analyze the macroeconomic impact of tax changes, distinguishing between tax rate and tax base changes, and further separating between changes in personal income, corporate income, and value added tax. Our results suggest that base broadening during fiscal consolidations leads to smaller output and employment declines compared to rate hikes, even when distinguishing between tax types.
Fiscal Policy after the Financial Crisis
| Author | : Alberto Alesina |
| Publisher | : University of Chicago Press |
| Total Pages | : 596 |
| Release | : 2013-06-25 |
| Genre | : Business & Economics |
| ISBN | : 022601844X |
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The recent recession has brought fiscal policy back to the forefront, with economists and policy makers struggling to reach a consensus on highly political issues like tax rates and government spending. At the heart of the debate are fiscal multipliers, whose size and sensitivity determine the power of such policies to influence economic growth. Fiscal Policy after the Financial Crisis focuses on the effects of fiscal stimuli and increased government spending, with contributions that consider the measurement of the multiplier effect and its size. In the face of uncertainty over the sustainability of recent economic policies, further contributions to this volume discuss the merits of alternate means of debt reduction through decreased government spending or increased taxes. A final section examines how the short-term political forces driving fiscal policy might be balanced with aspects of the long-term planning governing monetary policy. A direct intervention in timely debates, Fiscal Policy after the Financial Crisis offers invaluable insights about various responses to the recent financial crisis.
What Have We Learned?
| Author | : George A. Akerlof |
| Publisher | : MIT Press |
| Total Pages | : 369 |
| Release | : 2016-09-02 |
| Genre | : Business & Economics |
| ISBN | : 0262529858 |
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Top economists consider how to conduct policy in a world where previous beliefs have been shattered by the recent financial and economic crises. Since 2008, economic policymakers and researchers have occupied a brave new economic world. Previous consensuses have been upended, former assumptions have been cast into doubt, and new approaches have yet to stand the test of time. Policymakers have been forced to improvise and researchers to rethink basic theory. George Akerlof, Nobel Laureate and one of this volume's editors, compares the crisis to a cat stuck in a tree, afraid to move. In April 2013, the International Monetary Fund brought together leading economists and economic policymakers to discuss the slowly emerging contours of the macroeconomic future. This book offers their combined insights. The editors and contributors—who include the Nobel Laureate and bestselling author Joseph Stiglitz, Federal Reserve Vice Chair Janet Yellen, and the former Governor of the Bank of Israel Stanley Fischer—consider the lessons learned from the crisis and its aftermath. They discuss, among other things, post-crisis questions about the traditional policy focus on inflation; macroprudential tools (which focus on the stability of the entire financial system rather than of individual firms) and their effectiveness; fiscal stimulus, public debt, and fiscal consolidation; and exchange rate arrangements.
