Effects of Fiscal Stimulus in Structural Models

• Published in: American economic journal. Macroeconomics Vol. 4; no. 1; pp. 22 - 68
• Main Authors: Coenen, Günter, Erceg, Christopher J., Freedman, Charles, Furceri, Davide, Kumhof, Michael, Lalonde, René, Laxton, Douglas, Lindé, Jesper, Mourougane, Annabelle, Muir, Dirk, Mursula, Susanna, De Resende, Carlos, Roberts, John, Roeger, Werner, Snudden, Stephen, Trabandt, Mathias, in't Veld, Jan
• Format: Journal Article
• Language: English
• Published: Pittsburgh American Economic Association 01.01.2012
• Subjects: Accomodative monetary policy; Antizyklische Finanzpolitik; Central banks; Dynamisches Gleichgewicht; Economic analysis; Economic conditions; Economic growth; Economic models; Economic policy; Economic statistics; Economic theory; Finanzpolitik; Fiscal policy; Fiscal stimulus; Global economy; Government spending; Income taxes; Inflation rates; Liquidity; Macroeconomic modeling; Macroeconomics; Modeling; Modellierung; Monetary policy; Multiplikator; Neoklassische Synthese; Recessions; Studies; Tax cuts; Theorie; Wirtschaftskrise
• ISSN: 1945-7707; 1945-7715
• DOI: 10.1257/mac.4.1.22

The paper subjects seven structural DSGE models, all used heavily by policymaking institutions, to discretionary fiscal stimulus shocks using seven different fiscal instruments, and compares the results to those of two prominent academic DSGE models. There is considerable agreement across models on both the absolute and relative sizes of different types of fiscal multipliers. The size of many multipliers is large, particularly for spending and targeted transfers. Fiscal policy is most effective if it has moderate persistence and if monetary policy is accommodative. Permanently higher spending or deficits imply significantly lower initial multipliers.