Facultés Universitaires Notre-Dame de la Paix (FUNDP) - Faculty of Economics, Management and Social Sciences; National Bank of Belgium
Date Written: March 11, 2015
Abstract
This paper employs fifteen dynamic macroeconomic models maintained within the European System of Central Banks to assess the size of fiscal multipliers in European countries. Using a set of common simulations, we consider transitory and permanent shocks to government expenditures and different taxes. We investigate how the baseline multipliers change when monetary policy is transitorily constrained by the zero nominal interest rate bound, certain crisis-related structural features of the economy such as the share of liquidity-constrained households change, and the endogenous fiscal rule that ensures fiscal sustainability in the long run is specified in terms of labour income taxes instead of lump-sum taxes.
Keywords: fiscal policy, output multipliers, model comparison, zero lower bound
Kilponen, Juha and Pisani, Massimiliano and Schmidt, Sebastian and Corbo, Vesna and Hlédik, Tibor and Hollmayr, Josef and Hurtado, Samuel and Júlio, Paulo and Kulikov, Dmitry and Lemoine, Matthieu and Lozej, Matija and Lundvall, Henrik and Maria, José and Micallef, Brian and Papageorgiou, Dimitris and Rysanek, Jakub and Sideris, Dimitrios and Thomas, Carlos and de Walque, Gregory and de Walque, Gregory, Comparing Fiscal Multipliers Across Models and Countries in Europe (March 11, 2015). ECB Working Paper No. 1760, Available at SSRN: https://ssrn.com/abstract=2576673 or http://dx.doi.org/10.2139/ssrn.2576673
European Economics: Political Economy & Public Economics eJournal
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