Premium
ON FISCAL MULTIPLIERS: ESTIMATES FROM A MEDIUM SCALE DSGE MODEL
Author(s) -
ZUBAIRY SARAH
Publication year - 2014
Publication title -
international economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.658
H-Index - 86
eISSN - 1468-2354
pISSN - 0020-6598
DOI - 10.1111/iere.12045
Subject(s) - dynamic stochastic general equilibrium , economics , government spending , fiscal policy , counterfactual thinking , context (archaeology) , monetary economics , macroeconomics , fiscal multiplier , multiplier (economics) , general equilibrium theory , monetary policy , business cycle , welfare , market economy , paleontology , philosophy , epistemology , biology
This article contributes to the debate on fiscal multipliers, in the context of an estimated dynamic stochastic general equilibrium model, featuring a rich fiscal policy block and a transmission mechanism for government spending shocks. I find the multiplier for government spending to be 1.07, which is largest on impact. The multipliers for labor and capital tax on impact are 0.13 and 0.34, respectively. The effects of tax cuts take time to build and exceed stimulative effects of spending by 12–20 quarters. I carry out counterfactual exercises to show how alternative financing methods and expected monetary policy have consequences for the size of fiscal multipliers.