Why Do Fiscal Multipliers Depend on Fiscal Positions?

Why Do Fiscal Multipliers Depend on Fiscal Positions?

The fiscal position can affect fiscal multipliers through two channels. Through the Ricardian channel, households reduce consumption in anticipation of future fiscal adjustments when fiscal stimulus is implemented from a weak fiscal position. Throu...

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Bibliographic Details
Main Authors: Huidrom, Raju, Kose, M. Ayhan, Lim, Jamus J., Ohnsorge, Franziska L.
Format: Working Paper
Language:English
Published: World Bank, Washington, DC 2019
Subjects:
FISCAL MULTIPLIER
FISCAL POSITION
FISCAL TRENDS
STATE DEPENDENCY
RICARDIAN CHANNEL
INTEREST RATE
BUSINESS CYCLES
VECTOR AUTOREGRESSION
Online Access:http://documents.worldbank.org/curated/en/696521553109989507/Why-Do-Fiscal-Multipliers-Depend-on-Fiscal-Positions
http://hdl.handle.net/10986/31432
id okr-10986-31432
recordtype oai_dc
spelling okr-10986-314322022-09-15T12:18:52Z Why Do Fiscal Multipliers Depend on Fiscal Positions? Huidrom, Raju Kose, M. Ayhan Lim, Jamus J. Ohnsorge, Franziska L. FISCAL MULTIPLIER FISCAL POSITION FISCAL TRENDS STATE DEPENDENCY RICARDIAN CHANNEL INTEREST RATE BUSINESS CYCLES VECTOR AUTOREGRESSION The fiscal position can affect fiscal multipliers through two channels. Through the Ricardian channel, households reduce consumption in anticipation of future fiscal adjustments when fiscal stimulus is implemented from a weak fiscal position. Through the interest rate channel, fiscal stimulus from a weak fiscal position heightens investors' concerns about sovereign credit risk, raises economy-wide borrowing cost, and reduces private domestic demand. The paper documents empirically the relevance of these two channels using an Interactive Panel Vector Auto Regression model. It finds that fiscal multipliers tend to be smaller when fiscal positions are weak than strong. 2019-03-21T18:44:51Z 2019-03-21T18:44:51Z 2019-03 Working Paper http://documents.worldbank.org/curated/en/696521553109989507/Why-Do-Fiscal-Multipliers-Depend-on-Fiscal-Positions http://hdl.handle.net/10986/31432 English Policy Research Working Paper;No. 8784 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo World Bank World Bank, Washington, DC Publications & Research Publications & Research :: Policy Research Working Paper
repository_type Digital Repository
institution_category Foreign Institution
institution Digital Repositories
building World Bank Open Knowledge Repository
collection World Bank
language English
topic FISCAL MULTIPLIER
FISCAL POSITION
FISCAL TRENDS
STATE DEPENDENCY
RICARDIAN CHANNEL
INTEREST RATE
BUSINESS CYCLES
VECTOR AUTOREGRESSION
spellingShingle FISCAL MULTIPLIER
FISCAL POSITION
FISCAL TRENDS
STATE DEPENDENCY
RICARDIAN CHANNEL
INTEREST RATE
BUSINESS CYCLES
VECTOR AUTOREGRESSION
Huidrom, Raju
Kose, M. Ayhan
Lim, Jamus J.
Ohnsorge, Franziska L.
Why Do Fiscal Multipliers Depend on Fiscal Positions?
relation Policy Research Working Paper;No. 8784
description The fiscal position can affect fiscal multipliers through two channels. Through the Ricardian channel, households reduce consumption in anticipation of future fiscal adjustments when fiscal stimulus is implemented from a weak fiscal position. Through the interest rate channel, fiscal stimulus from a weak fiscal position heightens investors' concerns about sovereign credit risk, raises economy-wide borrowing cost, and reduces private domestic demand. The paper documents empirically the relevance of these two channels using an Interactive Panel Vector Auto Regression model. It finds that fiscal multipliers tend to be smaller when fiscal positions are weak than strong.
format Working Paper
author Huidrom, Raju
Kose, M. Ayhan
Lim, Jamus J.
Ohnsorge, Franziska L.
author_facet Huidrom, Raju
Kose, M. Ayhan
Lim, Jamus J.
Ohnsorge, Franziska L.
author_sort Huidrom, Raju
title Why Do Fiscal Multipliers Depend on Fiscal Positions?
title_short Why Do Fiscal Multipliers Depend on Fiscal Positions?
title_full Why Do Fiscal Multipliers Depend on Fiscal Positions?
title_fullStr Why Do Fiscal Multipliers Depend on Fiscal Positions?
title_full_unstemmed Why Do Fiscal Multipliers Depend on Fiscal Positions?
title_sort why do fiscal multipliers depend on fiscal positions?
publisher World Bank, Washington, DC
publishDate 2019
url http://documents.worldbank.org/curated/en/696521553109989507/Why-Do-Fiscal-Multipliers-Depend-on-Fiscal-Positions
http://hdl.handle.net/10986/31432
_version_ 1764474317597310976

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