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

Pyun, Ju Hyun; Rhee, Dong-Eun

doi:10.1111/coep.12067

Cited by 14 publications

(8 citation statements)

References 35 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Thus, our findings on international financial integration and the saving offset need to be understood in regard to previous studies on cross‐country fiscal multipliers. In a theoretical sense, our results are consistent with those of previous studies that find large fiscal multipliers when interest rates are binding at a zero lower bound or lowered because of expansionary monetary policy (e.g., Christiano, Eichenbaum, & Rebelo, ; Pyun & Rhee, ). Furthermore, our results on the divergence in the saving offset between advanced economies and emerging and developing economies appear to echo the findings of Ilzetzki et al.…”

Section: Empirical Analysissupporting

confidence: 91%

Measuring the time‐varying effects of fiscal policy on private saving in the process of financial integration

Cho

Pyun

2019

Rev International Economics

Self Cite

View full text Add to dashboard Cite

This paper investigates the effects of fiscal policy, measured as the extent to which private saving is offset by public saving, in the process of international financial integration. Using extensive panel data for 87 countries over the period 1970–2010, we find that the dynamics for the saving offset are highly nonlinear and time‐varying. While the saving offset has gradually declined in line with rapid financial integration in advanced economies, it has remained broadly stable in less financially integrated emerging and developing economies. This implies that the negative wealth effects of fiscal policy in advanced economies have been smaller owing to higher financial integration, which could help governments reduce their debt burdens through the well‐anchored domestic interest rates at the world level.

show abstract

Section: Empirical Analysissupporting

confidence: 91%

Measuring the time‐varying effects of fiscal policy on private saving in the process of financial integration

Cho

Pyun

2019

Rev International Economics

Self Cite

View full text Add to dashboard Cite

show abstract

“…The latter result is new for developing and has important policy implications. A similar finding is described in Belinga and Lonkeng (2015) and Pyun and Rhee (2015) for the US and OECD economies, respectively.…”

Section: Statistical Significance Of Fiscal Multiplierssupporting

confidence: 86%

The size of fiscal Multipliers and the stance of monetary policy in developing economies

Ojeda-Joya¹,

Guzman²

2017

View full text Add to dashboard Cite

In this paper we estimate the effect of government consumption shocks on GDP using a panel of 21 developing economies. Our goal is to better understand the reasons for the low fiscal multipliers found in the literature by performing estimations for alternative exchange rate regimes, business-cycle phases, and monetary policy stances. In addition, we perform counterfactual simulations to analyze the possible gains from fiscal-monetary policy coordination. The results imply that government consumption shocks are usually followed by monetary policy tightening in developing economies with flexible regimes. Our simulations show that this reaction partially explains the presence of low fiscal multipliers in these economies. Government consumption shocks imply lower multipliers in developing economies during flexible regimes, economic slowdowns or monetary contractions. In addition, implementing fiscal programs during monetary expansions seems to improve significantly their economic stimulus.

show abstract

“…As a result of import growth, the country faces the crowding-out effect on net exports, which is accompanied by a decrease in GDP. Pyun and Rhee (2015) investigating the fiscal multipliers of 21 OECD economies, confirmed this effect through internal and external transmissions. The negative impact of public debt on economic growth originates through the crowding-out effect, while its influence depends on the marginal propensity to import and the exchange rate.…”

Section: Expenditure Multiplier As An Explanatory Factor Of the Heterogeneity In The Debt-growth Relationshipmentioning

confidence: 82%

“…Average of government effectiveness estimate for the periods 2005-2009, 2010-2014, and 2015. Lagged values correspond to 1995-1999, 2000-2004, 2005-2009, and 2010-2014 Governance Indicators GE.EST.…”

Section: Quality Of Institutions Qoimentioning

confidence: 99%

Empirical Evidence on Factors Conditioning the Turning Point of the Public Debt–Growth Relationship

et al. 2021

View full text Add to dashboard Cite

This paper contributes to the limited literature on the factors conditioning the turning point of the public debt–growth relationship. A decade after the global financial crisis, when the debt ratio in many countries was still above pre-crisis levels, the COVID-19 pandemic again increased the pressure on public finances. It revived the debate on the ability to promote economic recovery through debt-financed government expenditure. However, more intense government borrowing increases its costs and uncertainty about future taxation policy, thus potentially disturbing private consumption, investment, and economic growth. In this paper, we estimate the thresholds of indicators on which the expenditure multiplier depends, which may already imply a risk that public debt will dampen economic growth. We use a methodology of structural threshold regression to examine the varying effects that debt might have on growth using consumption, investment, taxes, and imports as threshold variables, as well as several other factors suggested by previous contributions. The applied methodology allows for the addressing of parameter heterogeneity and endogeneity to be accounted for at the same time. The main results suggest that a positive debt effect is more likely if the conditions for a high expenditure multiplier are met, that an increase in the public-debt-to-GDP ratio is not necessarily deleterious to growth if shares of private consumption and investment in GDP are high, while the tax-revenue-to-GDP ratio is low.

show abstract

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

Cited by 14 publications

References 35 publications

Measuring the time‐varying effects of fiscal policy on private saving in the process of financial integration

Measuring the time‐varying effects of fiscal policy on private saving in the process of financial integration

The size of fiscal Multipliers and the stance of monetary policy in developing economies

Empirical Evidence on Factors Conditioning the Turning Point of the Public Debt–Growth Relationship

Contact Info

Product

Resources

About