THE SIZE OF FISCAL MULTIPLIERS AND THE STANCE OF MONETARY POLICY IN DEVELOPING ECONOMIES

摘要

Implementing fiscal programs during monetary policy expansions seems to improve significantly their economic stimulus. We find this result by estimating the effect of government consumption shocks on gross domestic product (GDP) using a panel of 23 developing economies. Our goal is to better understand the reasons for the low fiscal multipliers found in the literature by performing estimations for alternative exchange rate regimes, business-cycle phases, and monetary policy stances. In addition, we perform counterfactual simulations to analyze the possible gains from fiscal-monetary policy coordination. Our results also show lower multipliers in developing economies with flexible regimes, especially during economic slowdowns. (JEL E62, E63, F32)