Three States of Fiscal Multipliers in a Small Open Economy

2014 ◽  
Author(s):  
Simon Naitram ◽  
Shane Lowe ◽  
Justin Carter
Keyword(s):  
Open Economy ◽  
Small Open Economy ◽  
Fiscal Multipliers

scholarly journals Post-2008 Brazilian fiscal policy: an interpretation through the analysis of fiscal multipliers

2017 ◽  
Vol 47 (1) ◽  
pp. 93-124
Author(s):  
Celso José Costa Junior ◽  
Alejandro C. García Cintado ◽  
Armando Vaz Sampaio
Keyword(s):  
Fiscal Policy ◽  
Open Economy ◽  
Public Investment ◽  
Aggregate Demand ◽  
Small Open Economy ◽  
New Keynesian ◽  
Fiscal Policies ◽  
Fiscal Multipliers ◽  
Brazilian Government ◽  
The Government

Abstract The global crisis that erupted in 2007 led many countries to embark on countercyclical fiscal policies as a way to cushion the blow of a depressed aggregate demand. Advocates of discretionary measures emphasize that fiscal policy can indeed stimulate the economy. The main goal of this work is to assess whether the fiscal policies pursued by the Brazilian government in the aftermath of the 2008 crisis, succeeded in bringing the economy back on track in a sustainable fashion. To this end, the fiscal multipliers of five different shocks are studied in a small open-economy New Keynesian framework. Our results point to the government spending and public investment as the most effective fiscal tools for combating the crisis. However, the highest fiscal multiplier turned out to be the one associated with excise tax reductions.

scholarly journals Fiscal austerity in emerging market economies

2020 ◽  
Vol 0 (0) ◽  
Author(s):  
Chetan Dave ◽  
Chetan Ghate ◽  
Pawan Gopalakrishnan ◽  
Suchismita Tarafdar
Keyword(s):  
Open Economy ◽  
Private Consumption ◽  
Emerging Market ◽  
Small Open Economy ◽  
Emerging Market Economies ◽  
Fiscal Multipliers ◽  
Market Economies ◽  
World Economic ◽  
Fiscal Consolidations ◽  
Fiscal Austerity

AbstractWe build a small open economy RBC model with financial frictions to analyse spending and tax based fiscal consolidations in emerging market economies (EMEs). We show that if government spending is a substitute to private consumption in household utility, a spending based fiscal consolidation has an expansionary effect on output. In contrast, tax based consolidations are always contractionary irrespective of the strength of substitutability between government and private consumption. Our findings support the results in the World Economic Outlook (2010), USA: International Monetary Fund, that tax based consolidation measures are more costly (in terms of GDP losses) than spending based consolidations. We calibrate the model to India and calculate the fiscal multipliers associated with spending and tax based fiscal consolidations. Our paper identifies new mechanisms that underlie the dynamics of fiscal reforms and their implications for successful fiscal consolidations.

The long-run stability of a small, open economy under crawling peg regime

2002 ◽  
Vol 52 (1) ◽  
pp. 57-78
Author(s):  
S. Çiftçioğlu
Keyword(s):  
Exchange Rate ◽  
Open Economy ◽  
Risk Premium ◽  
Small Open Economy ◽  
Exchange Rate Policy ◽  
Price Stability ◽  
Output Stability ◽  
Long Run ◽  
The Exchange Rate ◽  
The Impact

The paper analyses the long-run (steady-state) output and price stability of a small, open economy which adopts a “crawling-peg” type of exchange-rate regime in the presence of various kinds of random shocks. Analytical and simulation results suggest that with the exception of money demand shocks, an exchange rate policy which involves a relatively higher rate of indexation of the exchange rate to price level is likely to lead to the worsening of price stability for all types of shocks. On the other hand, the impact of adopting such a policy on output stability depends on the type of the shock; for policy shocks to the exchange rate and shocks to output demand, output stability is worsened whereas for the shocks to risk premium of domestic assets, supply price of domestic output and the wage rate, better output stability is achieved in the long run.

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