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Fiscal Stimulus to the Rescue? Short-Run Benefits and Potential Long-Run Costs of Fiscal Deficits, Douglas Laxton, Dirk Muir, Michael Kumhof, Susanna Mursula, Charles Freedman

Label
Fiscal Stimulus to the Rescue? Short-Run Benefits and Potential Long-Run Costs of Fiscal Deficits, Douglas Laxton, Dirk Muir, Michael Kumhof, Susanna Mursula, Charles Freedman
Language
eng
Abstract
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
resource.governmentPublication
international or intergovernmental publication
Literary Form
non fiction
Main title
Fiscal Stimulus to the Rescue? Short-Run Benefits and Potential Long-Run Costs of Fiscal Deficits
Nature of contents
dictionaries
Oclc number
870244709
Responsibility statement
Douglas Laxton, Dirk Muir, Michael Kumhof, Susanna Mursula, Charles Freedman
Series statement
IMF Working Papers
Table Of Contents
Cover Page; Title Page; Copyright Page; Contents; I. Introduction; 1. WEO Revisions to US GDP, Inflation and Interest Rates since April 2007; 2. United States: Net Worth, Liabilities, and Risky Spread; II. Literature Review; III. The Model; A. Overview; B. Households; 1. Overlapping Generations (OLG) Households; 2. Liquidity-Constrained (LIQ) Households and Aggregate Households; C. Firms; 1. General Comments; 2. Entrepreneurs and Banks; D. Governmental Authorities; 1. Budget Constraint; 2. Fiscal Policy; 3. Monetary Policy; E. CalibrationIV. Two Important Shocks and the Financial AcceleratorA. Decline in Productivity Growth; 3. U.S. Persistent Productivity Growth Shock (Deviation from Baseline); B. Increase in Borrower Riskiness; 4. U.S. Persistent Increase in Borrower Riskiness (Deviation from Baseline); V. Short-Run Fiscal Multipliers; 5. U.S. Fiscal Stimulus, Instrument=Gov't Investment (Deviation from Baseline); A. Increase in Government Investment Expenditures; B. Increase in General Lump-Sum Transfers; 6. U.S. Fiscal Stimulus, Instrument=General Transfers (Deviation from Baseline)C. Increase in Targeted Lump-Sum Transfers7. U.S. Fiscal Stimulus, Instrument=Targeted Transfers (Deviation from Baseline); D. Decrease of the Labor Income Tax Rate; 8. U.S. Fiscal Stimulus, Instrument=Labor Income Tax (Deviation from Baseline); VI. Effects of Announced G20 Fiscal Stimulus Packages; 1. GDP Effects of G-20 Fiscal Stimulus (Percent Deviation from Baseline); VII. Long-Run Effects of the Accumulation of Public Debt; 9. Dynamic Effects of a 10 Percentage Point Increase in the Debt to GDP Ratio2. Effects of a Permanent 10 Percentage Point Increase in the U.S. Government Debt to GDP Ratio (Deviation from Baseline)VIII. Concluding Remarks; References; Footnotes
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