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Estimating the dynamics of fiscal financing in emerging economies

Author

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  • Krastina Dzhambova

    (Department of Economics, College of Business and Economics, University of Wisconsin- Whitewater, Whitewater, USA)

Abstract

I present a theoretical model and an empirical approach for jointly estimating the effectiveness of fiscal policy and the stochastic process of sovereign interest rate shocks. The theoretical model has features relevant to small open and emerging economies. Interest rate shocks affect the ability of firms to finance payroll expenses. This theoretical feature creates a propagation mechanism for interest rate shocks and affects government spending multipliers. This paper proposes a strategy for jointly estimating government spending multipliers and the interest rate shock process parameters.

Suggested Citation

  • Krastina Dzhambova, 2024. "Estimating the dynamics of fiscal financing in emerging economies," Economic Analysis Letters, Anser Press, vol. 3(1), pages 16-29, March.
    • Handle: RePEc:bba:j00004:v:3:y:2024:i:1:p:16-29:d:204
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    References listed on IDEAS

    as
    1. Mark Gertler & Simon Gilchrist & Fabio M. Natalucci, 2007. "External Constraints on Monetary Policy and the Financial Accelerator," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 39(2‐3), pages 295-330, March.
    2. Jordi Galí & J. David López-Salido & Javier Vallés, 2007. "Understanding the Effects of Government Spending on Consumption," Journal of the European Economic Association, MIT Press, vol. 5(1), pages 227-270, March.
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