Measuring the Output Responses to Fiscal Policy

Abstract

The impact of fiscal policy on output and its components has long been a central part of fiscal policy analysis. But, as has been made clear by the recent debate over the likely effects and desired composition of fiscal stimulus in the United States and abroad, there remains an enormous range of views over the strength of fiscal policy's macroeconomic effects, the channels through which these effects are transmitted, and the variations in these effects and channels with respect to economic conditions. In particular, the central issue is the size of fiscal multipliers when the economy is in recession.The gist of the recent literature on this issue has effectively been to echo earlier Keynesian arguments that government spending is likely to have larger expansionary effects in recessions than in expansions. Intuitively, when the economy has slack, expansionary government spending shocks are less likely to crowd out private consumption or investment. To the extent discretionary fiscal policy is heavily used in recessions to stimulate aggregate demand, the key empirical question is how the effects of fiscal shocks vary over the business cycle. The answer to this question is not only interesting to policymakers in designing stabilization strategies but it can also help the economics profession to reconcile conflicting predictions about the effects of fiscal shocks across different types of macroeconomic models.

Fiscal Policy and the Business Cycle

“…16 The results are summarised in Figure 7. 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 Source: Auerbach -Gorodnichenko (2012) The above results are confirmed by the study of Huidrom et al (2016), demonstrating that in a period of recession the stimulating effect of fiscal expenditure is significantly higher. While in a period of recession multipliers of around 1.5-2 are obtained for a time horizon of 1-2 years, the values estimated for periods of expansion are statistically typically not different from zero.…”

The Hungarian Model: Hungarian Crisis Management in View of the Mediterranean Way

“…However, this assumption and the resulting procyclical fiscal policy proved to be one of the key mistakes in European crisis management. However, among other factors, the size of the multiplier depends strongly on the cyclical position of the economy, and it is the strongest in times of recession (Ilzetzki et al 2013;Auerbach -Gorodnichenko 2012). This means that in a crisis, the deficitreducing measures without economic stimulus elements hamper economic growth to such an extent that they undermine fiscal consolidation through the contraction of tax revenues.…”

A költségvetési politika és a gazdaság ciklikus pozíciójának kapcsolata

“…Robusztussági vizsgálatukkal azt találták a szerzők, hogy nagyjából 60 százalékos 16 A különböző fiskális kiadásokat is megvizsgálták, tipikusan a hadi kiadásokra, illetve a kormányzati beruházásokra kaptak magasabb multiplikátorértékeket, szemben a kormányzati fogyasztás keresletélénkítő kisebb hatásával. 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 Forrás: Auerbach -Gorodnichenko (2012) Molnár György -Soós Gábor Dániel -Világi Balázs Ezzel szemben a válság utáni kutatások azt támasztják alá, hogy a válságokban vég-rehajtott fiskális expanzió nem feltétlenül vezet kezelhetetlen méretű deficithez. Delong és Summers (2012) megmutatja, hogy ha a recesszió olyan mély, hogy hosszú távú negatív növekedési hatásai vannak -azaz hiszterézis esetén -reális paraméte-rértékek mellett a fiskális expanzió akár önfinanszírozó is lehet, azaz a hosszú távú növekedési nyereségből adódó többlet-adóbevétel fedezetet nyújthat az expanziót finanszírozó deficitre.…”