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Exploring The Output Effect Of Fiscal Policy Shocks In Low Income Countries
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Book Synopsis Exploring the Output Effect of Fiscal Policy Shocks in Low Income Countries by : Mr.Jiro Honda
Download or read book Exploring the Output Effect of Fiscal Policy Shocks in Low Income Countries written by Mr.Jiro Honda and published by International Monetary Fund. This book was released on 2020-01-17 with total page 28 pages. Available in PDF, EPUB and Kindle. Book excerpt: What do we know about the output effects of fiscal policy in low income countries (LICs)? There are very few empirical studies on the subject. This paper fills this gap by estimating the output effects of government spending shocks in LICs. Our analysis—based on the local projection method—finds that the output effects in LICs are markedly lower than those in AEs and marginally smaller than those in EMs. We also find that in LICs, the output effects are larger (i) during recessions; (ii) under a fixed exchange rate regime; and/or (iii) with higher quality of institutions. Our analysis could not confirm any statistically significant output effect under floating exchange rate regimes. For the estimation of the output effects of fiscal spending shocks, it is thus important to consider the state of the economy and the country’s structural characteristics. Our results imply that the output costs of fiscal adjustment in LICs may not be as large as previously thought, especially if adopted outside of a recession, based on cutting public consumption, and accompanied by reform to enhance institutions.
Book Synopsis Government Spending Effects in Low-income Countries by : Ms.Wenyi Shen
Download or read book Government Spending Effects in Low-income Countries written by Ms.Wenyi Shen and published by International Monetary Fund. This book was released on 2015-12-30 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt: Despite the voluminous literature on fiscal policy, very few papers focus on low-income countries (LICs). This paper develops a new-Keynesian small open economy model to show, analytically and through simulations, that some of the prevalent features of LICs—different types of financing including aid, the marginal efficiency of public investment, and the degree of home bias—play a key role in determining the effects of fiscal policy and related multipliers in these countries. External financing like aid increases the resource envelope of the economy, mitigating the private sector crowding out effects of government spending and pushing up the output multiplier. The same external financing, however, tends to appreciate the real exchange rate and as a result, traded output can respond quite negatively, reducing the overall output multiplier. Although capital scarcity implies high returns to public capital in LICs, declines in public investment efficiency can substantially dampen the output multiplier. Since LICs often import substantial amounts of goods, public investment may not be as effective in stimulating domestic production in the short run.
Book Synopsis Fiscal Multipliers and the State of the Economy by : Ms.Anja Baum
Download or read book Fiscal Multipliers and the State of the Economy written by Ms.Anja Baum and published by International Monetary Fund. This book was released on 2012-12-05 with total page 31 pages. Available in PDF, EPUB and Kindle. Book excerpt: Only a few empirical studies have analyzed the relationship between fiscal multipliers and the underlying state of the economy. This paper investigates this link on a country-by-country basis for the G7 economies (excluding Italy). Our results show that fiscal multipliers differ across countries, calling for a tailored use of fiscal policy. Moreover, the position in the business cycle affects the impact of fiscal policy on output: on average, government spending, and revenue multipliers tend to be larger in downturns than in expansions. This asymmetry has implications for the choice between an upfront fiscal adjustment versus a more gradual approach.
Book Synopsis The Effectiveness of Fiscal Policy in Stimulating Economic Activity by : Richard Hemming
Download or read book The Effectiveness of Fiscal Policy in Stimulating Economic Activity written by Richard Hemming and published by International Monetary Fund. This book was released on 2002-12 with total page 60 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.
Book Synopsis The Economic Effects of Fiscal Consolidation with Debt Feedback by : Mr.Marcello M. Estevão
Download or read book The Economic Effects of Fiscal Consolidation with Debt Feedback written by Mr.Marcello M. Estevão and published by International Monetary Fund. This book was released on 2013-05-31 with total page 51 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.
Book Synopsis The Distributional Effects of Government Spending Shocks in Developing Economies by : Davide Furceri
Download or read book The Distributional Effects of Government Spending Shocks in Developing Economies written by Davide Furceri and published by International Monetary Fund. This book was released on 2018-03-14 with total page 39 pages. Available in PDF, EPUB and Kindle. Book excerpt: We construct unanticipated government spending shocks for 103 developing countries from 1990 to 2015 and study their effects on income distribution. We find that unanticipated fiscal consolidations lead to a long-lasting increase in income inequality, while fiscal expansions lower inequality. The results are robust to several measures of income distribution and size of the fiscal shocks, to an alternative identification strategy, across expansions and recessions and across country groups (low-income countries versus emerging markets). An additional contribution of the paper is the computation of the medium-term inequality multiplier. This is on average about 1 in our sample, meaning that a cumulative decrease in government spending of 1 percent of GDP over 5 years is associated with a cumulative increase in the Gini coefficient over the same period of about 1 percentage point. The multiplier is larger for total government expenditure than for public investment and consumption (with the former having larger effect), likely due to the redistributive role of transfers. Finally, we find that (unanticipated) fiscal consolidations lead to an increase in poverty.
Book Synopsis The Effects of Monetary Policy Shocks on Inequality by : Davide Furceri
Download or read book The Effects of Monetary Policy Shocks on Inequality written by Davide Furceri and published by International Monetary Fund. This book was released on 2017-01-18 with total page 43 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper provides new evidence of the effect of monetary policy shocks on income inequality. Using a measure of unanticipated changes in policy rates for a panel of 32 advanced and emerging market countries over the period 1990-2013, the paper finds that contractionary (expansionary) monetary actions increase (reduce) income inequality. The effect, however, varies over time, depending on the type of the shocks (tightening versus expansionary monetary policy) and the state of the business cycle, and across countries depending on the share of labor income and redistribution policies. In particular, we find that the effect is larger for positive monetary policy shocks, especially during expansions. Looking across countries, we find that the effect is larger in countries with higher labor share of income and smaller redistribution policies. Finally, while an unexpected increase in policy rates increases inequality, changes in policy rates driven by an increase in growth are associated with lower inequality.
Book Synopsis Assessing The Impact Of Fiscal Shocks On Output In MENAP Countries by : Mr.Martin D. Cerisola
Download or read book Assessing The Impact Of Fiscal Shocks On Output In MENAP Countries written by Mr.Martin D. Cerisola and published by International Monetary Fund. This book was released on 2015-03-23 with total page 31 pages. Available in PDF, EPUB and Kindle. Book excerpt: This note is a reference guide to the econometric work on fiscal multipliers for MENAP countries. Spending and tax multipliers are estimated from conventional VAR models and identified using a sign-restrictions approach. Estimates show that fiscal multipliers tend to be small, except for those associated with government investment spending, which generally exceed unity. For the average MENAP country, fiscal multipliers for current spending, government consumption and government investment spending are 0.5, 0.8, and 1.1,respectively, while the tax revenues multiplier is estimated at around –0.4. There is also significant variation in the size of these multipliers across countries, consistent with differences in economic fundamentals, such as openness to trade and the flexibility of the exchange rate. The estimated multipliers are generally consistent with theoretical priors, and are in line with the evidence from the literature for other economies and categories of spending and taxes.
Book Synopsis Fiscal Spillovers by : Patrick Blagrave
Download or read book Fiscal Spillovers written by Patrick Blagrave and published by International Monetary Fund. This book was released on 2017-10-18 with total page 31 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.
Book Synopsis The Macroeconomic (and Distributional) Effects of Public Investment in Developing Economies by : Davide Furceri
Download or read book The Macroeconomic (and Distributional) Effects of Public Investment in Developing Economies written by Davide Furceri and published by International Monetary Fund. This book was released on 2017-10-20 with total page 39 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper provides new empirical evidence of the macroeconomic effects of public investment in developing economies. Using public investment forecast errors to identify unanticipated changes in public investment, the paper finds that increased public investment raises output in the short and medium term, with an average short-term fiscal multiplier of about 0.2. We find some evidence that the effects are larger: (i) during periods of slack; (ii) in economies operating with fixed exchange rate regimes; (iii) in more closed economies; (iv) in countries with lower public debt; and (v) in countries with higher investment efficiency. Finally, we show that increases in public investment tend to lower income inequality.
Book Synopsis The Macroeconomic and Distributional Implications of Fiscal Consolidations in Low-income Countries by : Adrian Peralta-Alva
Download or read book The Macroeconomic and Distributional Implications of Fiscal Consolidations in Low-income Countries written by Adrian Peralta-Alva and published by International Monetary Fund. This book was released on 2018-06-13 with total page 49 pages. Available in PDF, EPUB and Kindle. Book excerpt: We quantitatively investigate the macroeconomic and distributional impacts of fiscal consolidations in low-income countries (LICs) through value added tax (VAT), personal income tax (PIT), and corporate income tax (CIT). We extend the standard heterogeneous agents incomplete markets model by including multiple sectors and rural-urban distinction to capture salient features of LICs. We find that overall, VAT has the least efficiency costs but is highly regressive, while PIT impacts the economy in the opposite way with CIT staying in between. Cash transfers targeting rural households mitigate the negative distributional impacts of VAT most effectively, while public investment leads to little redistribution.
Book Synopsis Evolving Monetary Policy Frameworks in Low-Income and Other Developing Countries by : International Monetary Fund
Download or read book Evolving Monetary Policy Frameworks in Low-Income and Other Developing Countries written by International Monetary Fund and published by International Monetary Fund. This book was released on 2015-10-23 with total page 74 pages. Available in PDF, EPUB and Kindle. Book excerpt: Over the past two decades, many low- and lower-middle income countries (LLMICs) have improved control over fiscal policy, liberalized and deepened financial markets, and stabilized inflation at moderate levels. Monetary policy frameworks that have helped achieve these ends are being challenged by continued financial development and increased exposure to global capital markets. Many policymakers aspire to move beyond the basics of stability to implement monetary policy frameworks that better anchor inflation and promote macroeconomic stability and growth. Many of these LLMICs are thus considering and implementing improvements to their monetary policy frameworks. The recent successes of some LLMICs and the experiences of emerging and advanced economies, both early in their policy modernization process and following the global financial crisis, are valuable in identifying desirable features of such frameworks. This paper draws on those lessons to provide guidance on key elements of effective monetary policy frameworks for LLMICs.
Author :International Monetary Fund Publisher :International Monetary Fund ISBN 13 :1498344658 Total Pages :257 pages Book Rating :4.4/5 (983 download)
Book Synopsis Fiscal Policy and Long-Term Growth by : International Monetary Fund
Download or read book Fiscal Policy and Long-Term Growth written by International Monetary Fund and published by International Monetary Fund. This book was released on 2015-04-20 with total page 257 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper explores how fiscal policy can affect medium- to long-term growth. It identifies the main channels through which fiscal policy can influence growth and distills practical lessons for policymakers. The particular mix of policy measures, however, will depend on country-specific conditions, capacities, and preferences. The paper draws on the Fund’s extensive technical assistance on fiscal reforms as well as several analytical studies, including a novel approach for country studies, a statistical analysis of growth accelerations following fiscal reforms, and simulations of an endogenous growth model.
Book Synopsis The Effectiveness of Fiscal Policy in Stimulating Economic Activity by : Richard Hemming
Download or read book The Effectiveness of Fiscal Policy in Stimulating Economic Activity written by Richard Hemming and published by International Monetary Fund. This book was released on 2002-12 with total page 60 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.
Book Synopsis Fiscal Multipliers by : Nicoletta Batini
Download or read book Fiscal Multipliers written by Nicoletta Batini and published by International Monetary Fund. This book was released on 2014-10-02 with total page 33 pages. Available in PDF, EPUB and Kindle. Book excerpt: Fiscal multipliers are important tools for macroeconomic projections and policy design. In many countries, little is known about the size of multipliers, as data availability limits the scope for empirical research. This note provides general guidance on the definition, measurement, and use of fiscal multipliers. It reviews the literature related to their size, persistence and determinants. For countries where no reliable estimate is available, the note proposes a simple method to come up with reasonable values. Finally, the note presents options to incorporate multipliers in macroeconomic forecasts.
Book Synopsis Fiscal Policy after the Financial Crisis by : Alberto Alesina
Download or read book Fiscal Policy after the Financial Crisis written by Alberto Alesina and published by University of Chicago Press. This book was released on 2013-06-25 with total page 596 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.
Book Synopsis How Big (Small?) are Fiscal Multipliers? by : Ethan Ilzetzki
Download or read book How Big (Small?) are Fiscal Multipliers? written by Ethan Ilzetzki and published by International Monetary Fund. This book was released on 2011-03-01 with total page 68 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.
