Gechert, S., Hughes Hallett, A. & Rannenberg, A. (2015) “Fiscal multipliers in downturns and the effects of Eurozone consolidation“, Centre for Economic Policy Research, Policy Insight No. 79, 25 February.
The literature on fiscal multipliers has expanded greatly since the outbreak of the Global Crisis. This column introduces CEPR Policy Insight 79, which reports on a meta-regression analysis of fiscal multipliers collected from a broad set of empirical reduced form models. Multiplier estimates are significantly higher during economic downturns. Spending multipliers exceed tax multipliers, especially during recessions. The authors estimate that the Eurozone’s fiscal consolidation – most significantly transfer cuts – reduced GDP by 4.3% relative to the no-consolidation baseline in 2011, increasing to 7.7% in 2013.
Relevant posts:
- Buti, Μ. & Carnot, Ν. (2015) “What is a ‘responsible’ fiscal policy today for Europe?“, VoxEU Organisation, 24 February.
- Mitchell, B. (2014) “The inexact science of calibrating fiscal policy“, Bill Mitchell Blog: Modern Monetary Theory … macroeconomic reality, 02 December.
- Bloomberg Editors (2014) “Europe’s Deadly Fiscal Paralysis“, Bloomberg View, 31 October.