Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/179294
Authors: 
Kratena, Kurt
Streicher, Gerhard
Year of Publication: 
2017
Series/Report no.: 
WIFO Working Papers 540
Abstract: 
The recent macroeconomic literature dealing with fiscal policy multipliers is dominated by applications of aggregate DSGE (Dynamic Stochastic General Equilibrium) models, whereas multi-sectoral models (econometric input-output or CGE) are absent. This paper contributes to the debate from a multiregional, multi-sectoral perspective. The macroeconomic input-output model applied covers 67 countries (plus a statistical rest of world) and incorporates model blocks for private consumption, production, the labour market and the public sector. Household consumption follows the permanent income hypothesis, but with important liquidity constraints. This study calculates macroeconomic and sectoral impacts of fiscal policy in one peripheral EU economy (Spain) as well as their inter-regional spillovers to the rest of Europe. Multipliers are about 1.9 for public consumption and 1.2 for household taxes or transfers in the case of high liquidity constraints (1.6 and 0.9, respectively, for low liquidity constraints). Partially endogenous public spending produces additional domestic effects as well as relatively large spillovers for some highly indebted European countries.
Subjects: 
Input-output modelling
fiscal policy multiplier
consumption theory
JEL: 
C54
C67
H60
Document Type: 
Working Paper

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