Why Do Fiscal Multipliers Depend on Fiscal Positions?

• Tác giả: Raju Huidrom
• Ngôn ngữ: eng
• Ký hiệu phân loại: 339.52 Use of fiscal policy
• Thông tin xuất bản: World Bank, Washington, DC, 2019
• Bộ sưu tập: Tài liệu truy cập mở
• ID: 300622
• Chủ đề: 1. FISCAL MULTIPLIER; 2. FISCAL POSITION; 3. FISCAL TRENDS; 4. RICARDIAN CHANNEL; 5. STATE DEPENDENCY

Tóm tắt

The fiscal position can affect fiscal multipliers through two channels. Through the Ricardian channel, households reduce consumption in anticipation of future fiscal adjustments when fiscal stimulus is implemented from a weak fiscal position. Through the interest rate channel, fiscal stimulus from a weak fiscal position heightens investors' concerns about sovereign credit risk, raises economy-wide borrowing cost, and reduces private domestic demand. The paper documents empirically the relevance of these two channels using an Interactive Panel Vector Auto Regression model. It finds that fiscal multipliers tend to be smaller when fiscal positions are weak than strong.