[PDF] Macroeconomic Effects Of Government Spending Shocks eBook

Author : Syed Hussain
Publisher :
Page : 32 pages
File Size : 20,74 MB
Release : 2018
Category :
ISBN :

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This paper examines the macroeconomic effects of government spending shocks in Canada for the period of 1949 - 2012. We use the narrative record, mostly the budget speech, to identify the size, timing, and principal motivation for all planned major government spending changes. To achieve identification, we consider those changes that are unrelated to the contemporaneous movements in the economy. The estimation, using our newly constructed data series on news of future government spending changes or the government spending shocks, shows that the government spending multiplier for Canada ranges from 0:91 to 1:52.

Author : Davide Furceri
Publisher : International Monetary Fund
Page : 39 pages
File Size : 21,50 MB
Release : 2018-03-14
Category : Business & Economics
ISBN : 1484347978

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We construct unanticipated government spending shocks for 103 developing countries from 1990 to 2015 and study their effects on income distribution. We find that unanticipated fiscal consolidations lead to a long-lasting increase in income inequality, while fiscal expansions lower inequality. The results are robust to several measures of income distribution and size of the fiscal shocks, to an alternative identification strategy, across expansions and recessions and across country groups (low-income countries versus emerging markets). An additional contribution of the paper is the computation of the medium-term inequality multiplier. This is on average about 1 in our sample, meaning that a cumulative decrease in government spending of 1 percent of GDP over 5 years is associated with a cumulative increase in the Gini coefficient over the same period of about 1 percentage point. The multiplier is larger for total government expenditure than for public investment and consumption (with the former having larger effect), likely due to the redistributive role of transfers. Finally, we find that (unanticipated) fiscal consolidations lead to an increase in poverty.

Author : Mr.Nooman Rebei
Publisher : International Monetary Fund
Page : 31 pages
File Size : 45,41 MB
Release : 2017-03-13
Category : Business & Economics
ISBN : 1475586671

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We empirically revisit the crowding-in effect of government spending on private consumption based on rolling windows of U.S. data. Results show that in earlier samples government spending is increasingly crowding in private consumption; however, this relation is reverted in the latest periods. We propose a model embedding non-separable public and private consumption in the utility function and rule-of-thumb consumers to assess the sources of non-monotonic changes in the transmission of the shock. The iterative full information estimation of the model reveals that changes in the co-movement between private and public spending is primarily driven by the fluctuations in the elasticity of substitution between private and public consumption, the share of financially constrained consumers, and the elasticity of intertemporal substitution.

Author : Mr.Abdul Abiad
Publisher : International Monetary Fund
Page : 26 pages
File Size : 48,88 MB
Release : 2015-05-04
Category : Business & Economics
ISBN : 1484361555

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This paper provides new evidence of the macroeconomic effects of public investment in advanced economies. Using public investment forecast errors to identify the causal effect of government investment in a sample of 17 OECD economies since 1985 and model simulations, the paper finds that increased public investment raises output, both in the short term and in the long term, crowds in private investment, and reduces unemployment. Several factors shape the macroeconomic effects of public investment. When there is economic slack and monetary accommodation, demand effects are stronger, and the public-debt-to-GDP ratio may actually decline. Public investment is also more effective in boosting output in countries with higher public investment efficiency and when it is financed by issuing debt.

Author : Ms.Adina Popescu
Publisher : International Monetary Fund
Page : 15 pages
File Size : 22,43 MB
Release : 2017-10-18
Category : Business & Economics
ISBN : 1484325222

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This note analyzes the impact of preannounced government spending shocks in the United States on the real effective exchange rate and the trade balance. Using a vector autoregression framework that allows anticipated fiscal shocks to be identified using survey information, we find that preannounced spending shocks lead to a sizable real effective dollar appreciation and a worsening of both the aggregate trade balance and bilateral trade balances in a panel of partner countries. The results are robust to controlling for country-specific variables like the macroeconomic and policy conditions in the recipient countries, are generalized across regions and might have decreased during the zero-interest-lower-bound regime.

Author : Tuan Khai Vu
Publisher :
Page : 0 pages
File Size : 30,18 MB
Release : 2013
Category :
ISBN :

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It is often recognized that government spending shocks are well anticipated before they actually materialize. This paper uses a new approach that is possible to identify a government spending shock as both an unanticipated and an anticipated (i.e. news) shock to study the macroeconomic effects of government spending in Japan. We find that, in the whole sample 1968Q1-2010Q1, there is a clear difference between an unanticipated government spending shock and an anticipated one: the former significantly increases both GDP and consumption while the latter does not. We also find that government spending is effective in terms of simulating the economy in the pre-bubble period, but in the post-bubble period it is not and even aggravates the business cycle fluctuations at some horizons.

Author : Mr.Jiro Honda
Publisher : International Monetary Fund
Page : 28 pages
File Size : 17,82 MB
Release : 2020-01-17
Category : Business & Economics
ISBN : 1513526030

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What do we know about the output effects of fiscal policy in low income countries (LICs)? There are very few empirical studies on the subject. This paper fills this gap by estimating the output effects of government spending shocks in LICs. Our analysis—based on the local projection method—finds that the output effects in LICs are markedly lower than those in AEs and marginally smaller than those in EMs. We also find that in LICs, the output effects are larger (i) during recessions; (ii) under a fixed exchange rate regime; and/or (iii) with higher quality of institutions. Our analysis could not confirm any statistically significant output effect under floating exchange rate regimes. For the estimation of the output effects of fiscal spending shocks, it is thus important to consider the state of the economy and the country’s structural characteristics. Our results imply that the output costs of fiscal adjustment in LICs may not be as large as previously thought, especially if adopted outside of a recession, based on cutting public consumption, and accompanied by reform to enhance institutions.