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

Author: Mr.Michael Kumhof

Publisher: International Monetary Fund

Published: 2009-11-01

Total Pages: 42

ISBN-13: 1451874014

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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.

Fiscal Stimulus to the Rescue?
Fiscal Stimulus to the Rescue?

Author:

Publisher:

Published: 2009

Total Pages: 42

ISBN-13:

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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.

Excess Savings and Twin Deficits
Excess Savings and Twin Deficits

Author: Rishabh Aggarwal

Publisher:

Published: 2022

Total Pages: 87

ISBN-13:

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We study the effects of debt-financed fiscal transfers in a general equilibrium, heterogeneous-agent model of the world economy. In the long run, increases in government debt anywhere raise the world interest rate and increase private wealth everywhere. In the short run, a country with a larger-than-average fiscal deficit experiences both a large increase in private savings ("excess savings") and a small but persistent current account deficit (a slow-motion "twin deficit"). These patterns are consistent with the evolution of the world's balance of payments since the beginning of the Covid pandemic.

Government investment and fiscal stimulus in the short and long runs
Government investment and fiscal stimulus in the short and long runs

Author: Eric Michael Leeper

Publisher:

Published: 2009

Total Pages: 35

ISBN-13:

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This paper contributes to the debate about fiscal multipliers by studying the impacts of government investment in conventional neoclassical growth models. The analysis focuses on two dimensions of fiscal policy that are critical for understanding the effects of government investment: implementation delays associated with building public capital projects and expected future fiscal adjustments to debt-financed spending. Implementation delays can produce small or even negative labor and output responses in the short run; anticipated fiscal financing adjustments matter both quantitatively and qualitatively for long-run growth effects. Taken together, these two dimensions have important implications for the short-run and long-run impacts of fiscal stimulus in the form of higher government infrastructure investment. The analysis is conducted in several models with features relevant for studying government spending, including utility-yielding government consumption, time-to-build for private investment, and government production.

Government Spending Or Tax Reduction
Government Spending Or Tax Reduction

Author: Marc Labonte

Publisher:

Published: 2002

Total Pages:

ISBN-13:

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Members have proposed several "stimulus" measures to help end the recession. A fundamental difference in competing stimulus packages is how much of the stimulus should be devoted to government spending and how much should be devoted to tax cuts. This report considers that issue in the context of conventional economic analysis. It first identifies any policy change that increases the budget deficit (or reduces a surplus) and is not entirely saved by the recipient as "stimulative" if the economy is operating below its full potential. It then separates the short-run effects of a budget deficit from the longrun effects. In this context, certain spending proposals may be more stimulative than certain tax reductions in the short run if they result in a bigger boost in aggregate spending. This advantage may come at the cost of forgone growth in the long run, however. The stimulative effects of two specific types of spending proposals are analyzed, an extension and expansion of unemployment benefits and health care subsidies for unemployed workers. P.L.107-147 was signed into law on March 9, 2002. This report will not be updated.

Government Spending Or Tax Reduction
Government Spending Or Tax Reduction

Author:

Publisher:

Published: 2003

Total Pages: 0

ISBN-13:

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Members have proposed several "stimulus" measures to help end the recession. A fundamental difference in competing stimulus packages is how much of the stimulus should be devoted to government spending and how much should be devoted to tax cuts. This report considers that issue in the context of conventional economic analysis. It first identifies any policy change that increases the budget deficit (or reduces a surplus) and is not entirely saved by the recipient as "stimulative" if the economy is operating below its full potential. It then separates the short-run effects of a budget deficit from the longrun effects. In this context, certain spending proposals may be more stimulative than certain tax reductions in the short run if they result in a bigger boost in aggregate spending. This advantage may come at the cost of forgone growth in the long run, however. This report will be updated as events warrant.

Iceland
Iceland

Author: International Monetary Fund

Publisher: International Monetary Fund

Published: 2010-10-04

Total Pages: 55

ISBN-13: 145520854X

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In this study, during 2008, the financial crisis lead Iceland’s public debt to soar from under 30 percent of GDP to more than 100 percent of GDP, and while underlying external debt came down sharply, it remains elevated at close to 300 percent of GDP. First, external sustainability is overviewed, and second, growth of Iceland’s economy has been challenged, and finally, fiscal adjustments and its macroeconomic impacts are overviewed. Traditional external debt sustainability analysis (DSA) suggests that Iceland’s external debt is sustainable but is vulnerable to depreciation shock.

Macroeconomic Effects of Public Pension Reforms
Macroeconomic Effects of Public Pension Reforms

Author: Ms.Anita Tuladhar

Publisher: International Monetary Fund

Published: 2010-12-01

Total Pages: 65

ISBN-13: 1455211788

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The paper explores the macroeconomic effects of three public pension reforms, namely an increase in retirement age, a reduction in benefits and an increase in contribution rates. Using a five-region version of the IMF‘s Global Integrated Monetary and Fiscal model (GIMF), we find that public pension reforms can have a positive effect on growth in both the short run, propelled by rising consumption, and in the long run, due to lower government debt crowding in higher investment. We also find that a reform action undertaken cooperatively by all regions results in larger output effects, reflecting stronger capital accumulation due to higher world savings. An increase in the retirement age reform yields the strongest impact in the short run, due to the demand effects of higher labor income and in the long run because of supply effects.

A European Unemployment Benefit Scheme
A European Unemployment Benefit Scheme

Author: Bertelsmann Stiftung

Publisher: Verlag Bertelsmann Stiftung

Published: 2014-03-01

Total Pages: 144

ISBN-13: 3867936005

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The recent euro crisis and the dramatic increase of unemployment in some euro countries have triggered a renewed interest in a fiscal capacity for the European Union to stabilize the economy of its member states. One of the proposed instruments is a common European unemployment insurance. In this book Sebastian Dullien from the HTW Berlin provides and evaluates a blueprint for such a scheme. Building on lessons from the unemployment insurance in the United States of America, he outlines how a European unemployment benefit scheme could be constructed to provide significant stabilization to national business cycles, yet without strongly extending social protection in Europe. Macroeconomic stabilization effects and payment flows between countries are simulated and options, potential pitfalls and existing concerns discussed.

Fiscal and Debt Policies for the Future
Fiscal and Debt Policies for the Future

Author: P. Arestis

Publisher: Springer

Published: 2014-04-30

Total Pages: 270

ISBN-13: 1137269537

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This book offers detailed analysis and informed comment on the future of emerging economic policies. It is essential reading for all postgraduates and scholars looking for expert discussion and debate on the issues surrounding economic policy.