Are the Effects of Fiscal Changes Different in Times of Crisis and Non-Crisis? The French Case

26 Pages Posted: 14 Jan 2012 Last revised: 14 Feb 2012

See all articles by Carine Bouthevillain

Carine Bouthevillain

Banque de France

Gilles Dufrénot

GREQAM and Aix-Marseille School of Economics

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Date Written: March 25, 2010

Abstract

This paper shows that the impact of changes in budgetary variables on real GDP, investment, consumption and employment varies in sign and magnitude in times of crisis and non-crisis. To this end, a regime-switching process is embedded in standard macroeconomic equations in order to take into account different budgetary regimes.

We find evidence of asymmetric effects for both the multiplier of government expenditure and the fiscal multiplier, with differing effects during the phases of crisis and non-crisis depending upon the level of debt, of the unemployment rate, of the output gap.

Keywords: fiscal policy, Markov-switching, crisis

Suggested Citation

Bouthevillain, Carine and Dufrénot, Gilles, Are the Effects of Fiscal Changes Different in Times of Crisis and Non-Crisis? The French Case (March 25, 2010). Available at SSRN: https://ssrn.com/abstract=1985183 or http://dx.doi.org/10.2139/ssrn.1985183

Carine Bouthevillain (Contact Author)

Banque de France ( email )

Paris
France

Gilles Dufrénot

GREQAM and Aix-Marseille School of Economics ( email )

Centre de la vieille Charité
2 rue de la Charité
13002 Marseille, 13236
France

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