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FISCAL MULTIPLIERS DURING THE GLOBAL FINANCIAL CRISIS: FISCAL AND MONETARY INTERACTION MATTERS
Author(s) -
Pyun Ju Hyun,
Rhee DongEun
Publication year - 2015
Publication title -
contemporary economic policy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.454
H-Index - 49
eISSN - 1465-7287
pISSN - 1074-3529
DOI - 10.1111/coep.12067
Subject(s) - economics , financial crisis , fiscal policy , fiscal multiplier , monetary economics , macroeconomics , crowding out , gross domestic product , vector autoregression , investment (military) , monetary policy , government spending , market economy , politics , welfare , political science , law
This study investigates the fiscal multipliers of 21 Organization for Economic Co‐operation and Development countries during the global financial crisis using panel vector auto regression methodology. Our findings suggest that the 1‐year fiscal multiplier was greater than 1 during the crisis, whereas it was less than 1 before the crisis because of different fiscal and monetary interactions. The combination of expansionary monetary and fiscal policies during the crisis boosted gross domestic product more effectively through internal and external transmissions: investment crowding‐out was limited, and net exports were spurred by the policy interaction. In addition, our results are robust to various specifications. ( JEL E61 , E63 , E65)