Fiscal Multipliers During the Global Financial Crisis: Fiscal and Monetary Interaction Matters

26 Pages Posted: 14 Feb 2014 Last revised: 19 Jun 2014

See all articles by Ju Hyun Pyun

Ju Hyun Pyun

Korea University Business School (KUBS)

Dong-Eun Rhee

Korea Institute for International Economic Policy

Multiple version iconThere are 2 versions of this paper

Date Written: January 5, 2014

Abstract

This study investigates the fiscal multipliers of 21 OECD countries during the global financial crisis using panel VAR methodology. Our findings suggest that the 1-year fiscal multiplier was greater than 1 during the crisis, whereas it was smaller than 1 before the crisis because of different fiscal and monetary interactions. The combination of expansionary monetary and fiscal policies during the crisis boosted GDP more effectively through internal and external transmissions: investment crowding-out was limited, and net exports were spurred by the policy interaction. In addition, our results are robust to various specifications.

Keywords: Fiscal Multiplier, Global Financial Crisis, Panel VAR, Dynamic Panel, Fiscal policy interaction

JEL Classification: E61, E63, E65

Suggested Citation

Pyun, Ju Hyun and Rhee, Dong-Eun, Fiscal Multipliers During the Global Financial Crisis: Fiscal and Monetary Interaction Matters (January 5, 2014). Available at SSRN: https://ssrn.com/abstract=2333084 or http://dx.doi.org/10.2139/ssrn.2333084

Ju Hyun Pyun

Korea University Business School (KUBS) ( email )

145 Anam-Ro, Seongbuk-Gu
Seoul, 02841
Korea, Republic of (South Korea)
82-2-3290-2610 (Phone)

HOME PAGE: http://sites.google.com/site/juhyunpyun/research

Dong-Eun Rhee (Contact Author)

Korea Institute for International Economic Policy ( email )

[30147] Building C, Sejong National Research Compl
Seoul, 370
Korea, Republic of (South Korea)

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