Country Heterogeneity and the International Evidence on the Effects of Fiscal Policy

Carlo Favero (), Francesco Giavazzi () and Jacopo Perego

No 17272, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper shows how the richer frequency and variety of fiscal policy shocks available in an international sample can be analyzed recognizing the heterogeneity that exists across different countries. The main conclusion of our empirical analysis is that the question "what is the fiscal policy multiplier" is an ill-posed one. There is no unconditional fiscal policy multiplier. The effect of fiscal policy on output is different depending on the different debt dynamics, the different degree of openness and the different fiscal reaction functions across different countries. There are many fiscal multipliers and an average fiscal multiplier is of very little use to describe the effect of exogenous shifts in fiscal policy on output.

JEL-codes: E62 H60 (search for similar items in EconPapers)
Date: 2011-08
New Economics Papers: this item is included in nep-cba and nep-mac
Note: IFM ME
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Published as Carlo Favero & Francesco Giavazzi & Jacopo Perego, 2011. "Country Heterogeneity and the International Evidence on the Effects of Fiscal Policy," IMF Economic Review, Palgrave Macmillan, vol. 59(4), pages 652-682, November.

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Journal Article: Country Heterogeneity and the International Evidence on the Effects of Fiscal Policy (2011)
Working Paper: Country Heterogeneity and the International Evidence on the Effects of Fiscal Policy (2011)
Working Paper: Country Heterogeneity and the International Evidence on the Effects of Fiscal Policy (2011)
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