Fiscal Policy Multipliers on Subnational Government Spending

2012 ◽  
Vol 4 (2) ◽  
pp. 46-68 ◽  
Author(s):  
Jeffrey Clemens ◽  
Stephen Miran
Keyword(s):  
Fiscal Policy ◽  
State Government ◽  
Government Spending ◽  
Stabilization Policy ◽  
Natural Experiments ◽  
Current Consumption ◽  
Sources Of Variation ◽  
Fiscal Stabilization ◽  
Alternative Sources ◽  
Policy Multipliers

Balanced budget requirements lead to substantial pro-cyclicality in state government spending, with the stringency of a state's rules driving the pace at which it must adjust to shocks. We show that fiscal institutions can generate natural experiments in deficit-financed spending that are informative regarding fiscal stabilization policy. Alternative sources of variation in subnational fiscal policy often implicitly involve “windfall” financing, which precludes any effect of future debt or taxation on current consumption and investment. Consistent with a role for these “Ricardian” effects, our estimates are smaller than those in related studies, implying an on-impact multiplier below 1. (JEL C51, E32, E62, H72)

HABIT FORMATION AND GOVERNMENT SPENDING IN A SMALL OPEN ECONOMY

2003 ◽  
Vol 7 (3) ◽  
pp. 407-423 ◽  
Author(s):  
Cem Karayalçin
Keyword(s):  
Fiscal Policy ◽  
General Equilibrium ◽  
Current Account ◽  
Open Economy ◽  
Equilibrium Model ◽  
Government Spending ◽  
Time Preference ◽  
Small Open Economy ◽  
Long Run ◽  
Fiscal Shocks

The paper studies the effects of an expansionary fiscal policy in a general equilibrium model of a small open economy. Households are assumed to possess habit-forming, endogenous rates of time preference. In response to fiscal shocks, the model generates cyclical endogenous persistence and procyclical time paths for consumption, employment, and investment, as well as a countercyclical path for the current account. Furthermore, fiscal shocks are shown to have positive long-run effects on output and negative long-run effects on consumption.

scholarly journals Economic policy and confidence of economic agents – a causal relationship?

2020 ◽  
Vol 20 (4) ◽  
pp. 471-484
Author(s):  
Silvo Dajčman
Keyword(s):  
Fiscal Policy ◽  
Granger Causality ◽  
Government Spending ◽  
Government Expenditure ◽  
Policy Instruments ◽  
Consumer Confidence ◽  
Causality Analysis ◽  
Economic Agents ◽  
Business Confidence ◽  
The Government

AbstractThe purpose of this paper is to study whether innovations in monetary and fiscal policy are a leading indicator of future business and consumer confidence and reverse applying the panel Granger causality analysis to two periods in the history of the euro area: before and after the start of the Great Recession. The results show that Granger causality interaction between the confidence of economic agents and the stance of monetary policy (measured by the shadow rate) is stronger than between the former and the fiscal policy instruments. The European Central Bank (ECB) shadow rate innovations Granger caused business and consumer confidence in both periods, but also indicators of confidence Granger caused the shadow rate. No such feedback could be established between two fiscal policy instruments (government expenditure and revenue growth) and the indicators of confidence. Government spending and revenues Granger caused business confidence in the first subperiod, but not in the second subperiod when the causality reversed. The government revenues Granger caused consumer confidence in the first subperiod, while government expenditures in the second subperiod. Consumer confidence Granger caused government spending in the first subperiod.

scholarly journals Local and aggregate fiscal policy multipliers

2017 ◽  
Vol 92 ◽  
pp. 16-30 ◽  
Author(s):  
Bill Dupor ◽  
Rodrigo Guerrero
Keyword(s):  
Fiscal Policy ◽  
Policy Multipliers

Experimental Designs in Business Research

2021 ◽  
Author(s):  
Heiko Breitsohl
Keyword(s):  
Internal Validity ◽  
Building Blocks ◽  
Experimental Designs ◽  
Management Research ◽  
Natural Experiments ◽  
Managerial Decisions ◽  
Sources Of Variation ◽  
Available Information ◽  
Statistical Conclusion ◽  
Business And Management

Conducting credible and trustworthy research to inform managerial decisions is arguably the primary goal of business and management research. Research design, particularly the various types of experimental designs available, are important building blocks for advancing toward this goal. Key criteria for evaluating research studies are internal validity (the ability to demonstrate causality), statistical conclusion validity (drawing correct conclusions from data), construct validity (the extent to which a study captures the phenomenon of interest), and external validity (the generalizability of results to other contexts). Perhaps most important, internal validity depends on the research design’s ability to establish that the hypothesized cause and outcome are correlated, that variation in them occurs in the correct temporal order, and that alternative explanations of that relationship can be ruled out. Research designs vary greatly, especially in their internal validity. Generally, experiments offer the strongest causal inference, because the causal variables of interest are manipulated by the researchers, and because random assignment makes subjects comparable, such that the sources of variation in the variables of interest can be well identified. Natural experiments can exhibit similar internal validity to the extent that researchers are able to exploit exogenous events creating (quasi-)randomized interventions. When randomization is not available, quasi-experiments aim at approximating experiments by making subjects as comparable as possible based on the best available information. Finally, non-experiments, which are often the only option in business and management research, can still offer useful insights, particularly when changes in the variables of interest can be modeled by adopting longitudinal designs.

The Impact of Fiscal Policy on Economic Activity over the Business Cycle: An Empirical Investigation in the Case of Algeria

2019 ◽  
Vol 15 (3) ◽  
Author(s):  
Abderrahim Chibi ◽  
Sidi Mohamed Chekouri ◽  
Mohamed Benbouziane
Keyword(s):  
Fiscal Policy ◽  
Business Cycle ◽  
Government Spending ◽  
Economic Recession ◽  
Policy Decision ◽  
Vector Autoregressive ◽  
Asymmetric Effects ◽  
The Business Cycle ◽  
The Right ◽  
The Impact

Abstract In this paper, we aim to analyze whether the effect of fiscal policy on economic growth in Algeria differs throughout the business cycle. To tackle this question, we use a Markov Switching Vector Autoregressive (MSVAR) framework. We find evidence of asymmetric effects of fiscal policy through regimes, defined by the state of the business cycle (recession and boom). The results show small positive government spending and revenue multipliers in the short term in both regimes. Most importantly, fiscal policy shocks have a stronger impact in times of economic recession than in times of expansion, which confirm the hypothesis of asymmetric effects. However, the impact of government spending is stronger than the impact of public revenue during recession periods. In addition, fiscal policy decision-makers interact with Anti-Keynesian view (pro-cyclical). Our results imply that there is something to gain by using the "right instrument" at the "right time".

Prospects for the Russian economy to end-2019

2019 ◽  
Keyword(s):  
Fiscal Policy ◽  
Government Spending ◽  
Policy Framework ◽  
Gdp Growth ◽  
Content Type ◽  
Low Level ◽  
Russian Economy ◽  
Macroeconomic Stability

Subject Prospects for the Russian economy to end-2019. Significance GDP growth slowed in the first quarter of 2019. Despite sluggish growth, macroeconomic stability persists. Government spending is restrained by a prudent fiscal policy framework, the state's borrowing requirements are minimal and inflation remains at an historically low level.

scholarly journals The South African tax mix and economic growth

2014 ◽  
Vol 8 (2) ◽  
pp. 201-210 ◽  
Author(s):  
AH De Wet ◽  
NJ Schoeman ◽  
SF Koch
Keyword(s):  
Economic Growth ◽  
Fiscal Policy ◽  
South African ◽  
Government Spending ◽  
Government Expenditure ◽  
Indirect Taxation ◽  
Size Of Government ◽  
Direct Taxation ◽  
The Impact ◽  
Direct Tax

The research reported in this paper suggests that government fiscal policy can influence economic growth through alterations in the tax mix and the overall size of government spending.   The authors estimate the impact on economic growth of changes in fiscal policy via government expenditure, direct taxation and indirect taxation.  The results show that economic growth is negatively affected by increases in the size of government, as reflected in its expenditures and direct tax revenues, although significant indirect tax effects are not found.     

scholarly journals Corruption, fiscal policy, and growth: a unified approach

2017 ◽  
Vol 17 (2) ◽  
Author(s):  
Sugata Ghosh ◽  
Kyriakos C. Neanidis
Keyword(s):  
Fiscal Policy ◽  
Government Spending ◽  
Income Tax ◽  
Government Expenditure ◽  
Tax Revenue ◽  
Unified Approach ◽  
Unified Framework ◽  
Bureaucratic Corruption ◽  
Inflation Rates ◽  
The Impact

AbstractWe study the effects of bureaucratic corruption on fiscal policy and economic growth, where corruption (i) reduces the tax revenue raised from households, (ii) inflates the volume of government spending, and (iii) reduces the productivity of “effective” government expenditure. We distinguish between the policies pursued by (a) a non-optimizing, and (b) an optimizing government. For both cases, corruption leads to higher income tax and inflation rates and a lower level of government spending, thus hindering growth. In the circumstances, an activist government could allocate its resources in attempting to reduce the type of corruption that harms growth the most. Finally, the findings from our unified framework could rationalize the sometimes conflicting empirical evidence on the impact of corruption on growth in the literature.

Sign in / Sign up

Export Citation Format

Share Document