Estimating Fiscal Multipliers with Correlated Heterogeneity

Released on by Emmanouil Kitsios
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  • Estimating Fiscal Multipliers with Correlated Heterogeneity Book Detail

  • Author : Emmanouil Kitsios
  • Release Date : 2016-02-04
  • Publisher : International Monetary Fund
  • Genre : Business & Economics
  • Pages : 51
  • ISBN 13 : 1498389805
  • File Size : 94,94 MB
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Estimating Fiscal Multipliers with Correlated Heterogeneity by Emmanouil Kitsios PDF Summary

Book Description: We estimate the average fiscal multiplier, allowing multipliers to be heterogeneous across countries or over time and correlated with the size of government spending. We demonstrate that this form of nonseparable unobserved heterogeneity is empirically relevant and address it by estimating a correlated random coefficient model. Using a panel dataset of 127 countries over the period 1994-2011, we show that not accounting for omitted heterogeneity produces a significant downward bias in conventional multiplier estimates. We rely on both crosssectional and time-series variation in spending shocks, exploiting the differential effects of oil price shocks on fuel subsidies, to identify the average government spending multiplier. Our estimates of the average multiplier range between 1.4 and 1.6.

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Fiscal Policy after the Financial Crisis

Fiscal Policy after the Financial Crisis

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The recent recession has brought fiscal policy back to the forefront, with economists and policy makers struggling to reach a consensus on highly political issu