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THE SIZE OF FISCAL MULTIPLIERS AND THE STANCE OF MONETARY POLICY IN DEVELOPING ECONOMIES
Author(s) -
OjedaJoya Jair N.,
Guzman Oscar E.
Publication year - 2019
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.12415
Subject(s) - economics , fiscal policy , monetary policy , counterfactual thinking , monetary economics , exchange rate , business cycle , macroeconomics , stimulus (psychology) , gross domestic product , multiplier (economics) , fiscal multiplier , government spending , market economy , psychology , philosophy , epistemology , welfare , psychotherapist
Implementing fiscal programs during monetary policy expansions seems to improve significantly their economic stimulus. We find this result by estimating the effect of government consumption shocks on gross domestic product (GDP) using a panel of 23 developing economies. Our goal is to better understand the reasons for the low fiscal multipliers found in the literature by performing estimations for alternative exchange rate regimes, business‐cycle phases, and monetary policy stances. In addition, we perform counterfactual simulations to analyze the possible gains from fiscal‐monetary policy coordination. Our results also show lower multipliers in developing economies with flexible regimes, especially during economic slowdowns. ( JEL E62, E63, F32)