Fiscal Multipliers in Turbulent Times: The Case of Spain

50 Pages Posted: 22 Jun 2013

See all articles by Pablo Hernández de Cos

Pablo Hernández de Cos

Banco de España

Enrique Moral-Benito

Banco de España; Universidad Carlos III de Madrid

Date Written: June 20, 2013


What are the output responses to fiscal policy? Despite important advances reported in the literature, quantifying the size of the fiscal multiplier remains a challenge. Indeed, the quest to estimate a unique fiscal multiplier is probably an ill-posed one. The magnitude of the multiplier may well depend on country- and time-specific characteristics of the fiscal stance under scrutiny. In this paper, we estimate state-specific multipliers for Spain depending on the state of the economy in several of its dimensions. The government spending multiplier is estimated to be larger during recessions and periods of banking stress, but much smaller (or even negative) during periods of weak public finances. Combining these three dimensions into a single global turmoil indicator by the use of principal component analysis, the estimated multipliers are 1.4 for crisis (or turbulent) times and 0.6 for tranquil times.

Keywords: fiscal policy, fiscal multiplier

JEL Classification: E62, H30

Suggested Citation

Hernández de Cos, Pablo and Moral-Benito, Enrique, Fiscal Multipliers in Turbulent Times: The Case of Spain (June 20, 2013). Banco de Espana Working Paper No. 1309. Available at SSRN: or

Pablo Hernández de Cos

Banco de España ( email )

Madrid, 28014

Enrique Moral-Benito (Contact Author)

Banco de España ( email )

Alcala 50
Madrid 28014

Universidad Carlos III de Madrid ( email )

CL. de Madrid 126
Madrid, Madrid 28903

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