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Fiscal Stimulus to the Rescue? Short-Run Benefits and Potential Long-Run Costs of Fiscal Deficits

This paper uses the IMF's Global Integrated Monetary and Fiscal Model to compute shortrun multipliers of fiscal stimulus measures and long-run crowding-out effects of higher debt. Multipliers of two-year stimulus range from 0.2 to 2.2 depending on the fiscal instrument, the extent of monetary a...

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Bibliographic Details
Main Author: Laxton, Douglas
Other Authors: Muir, Dirk, Kumhof, Michael, Mursula, Susanna
Format: eBook
Language:English
Published: Washington, D.C. International Monetary Fund 2009
Series:IMF Working Papers
Subjects:
Interest Rates
Wealth
Finance
Accommodative Monetary Policy
Monetary Economics
Saving
Real Interest Rates
Fiscal Policy
Consumption; Economics
Banks And Banking
Consumption
Macroeconomics
Monetary Policy
Macroeconomics: Consumption
Fiscal Stimulus
Interest Rates: Determination, Term Structure, And Effects
Public Finance
Money And Monetary Policy
United States
Online Access:
Collection: International Monetary Fund - Collection details see MPG.ReNa
Description
Summary:This paper uses the IMF's Global Integrated Monetary and Fiscal Model to compute shortrun multipliers of fiscal stimulus measures and long-run crowding-out effects of higher debt. Multipliers of two-year stimulus range from 0.2 to 2.2 depending on the fiscal instrument, the extent of monetary accommodation and the presence of a financial accelerator mechanism. A permanent 0.5 percentage point increase in the U.S. deficit to GDP ratio raises the U.S. tax burden and world real interest rates in the long run, thereby reducing U.S. and rest of the world output by 0.3-0.6 and 0.2 percent, respectively
Physical Description:40 pages
ISBN:9781451874013

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