Public Lecture: Determinants of Empirical Fiscal Multipliers

• 10 June 2022
  1:00 PM – 2:00 PM

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• P201, Faculty of Economics and Administration MU, Lipová 41a

The public lecture on the topic Determinants of Empirical Fiscal Multipliers delivered in English will take place on 10 June 2022 from 1 PM at the Faculty of Economics and Administration, lecture room P201 and online on MS Teams.

Abstract:
The estimation of fiscal multipliers (the ratio of the change in output to an exogenous change in government spending or taxes) is a central element for the evaluation of the macroeconomic effects of fiscal policy. Fiscal multipliers can be communicated and compared easily across different countries and time periods and the precision of their estimation contributes significantly to the quality of GDP growth predictions. The main bulk of the existing literature on the macroeconomic effects of fiscal interventions can be categorized as either model-based or empirical. Model-based approaches typically employ calibrated DSGE models to study the effects of fiscal stimuli in an internallyconsistent theoretical framework. The advantage of the model-based approach lies in the ability to analyse counterfactual scenarios by simulating the dynamics of the model variables under different conditions. On the other hand, empirical approaches, mostly based on SVAR models, tend to be more data-driven and typically impose less stringent restrictions on the structure of the economic model. Čapek and Crespo Cuaresma(2020) analyse the role played by data and specification choices as determinants of the size of the fiscal multipliers obtained using structural vector autoregressive models. The results, based on over twenty million fiscal multipliers estimated for European countries, indicate that many seemingly harmless modelling choices have a significant effect on the size and precision of fiscal multiplier estimates. In addition to the structural shock identification strategy, these modelling choices include the definition of spending and taxes, the national accounts system employed, the use of particular interest rates or inflation measures, or whether data are smoothed prior to estimation. The cumulative effects of such arguably innocuous methodological choices can lead to a change in the spending multipliers of as much as 0.4 points.

Organized by

Research and Projects Office (Faculty of Economics and Administration)

Responsibility

Mgr. Blanka Šustrová