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Structural characteristics and non-linear fiscal multipliers

Author

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  • Gupta, Mahima
  • Dubey, Amlendu

Abstract

We identify structural characteristics of economies which determine the fiscal multipliers in normal times. We find that structural variables determine fiscal multipliers in a non-linear fashion where fiscal multipliers change significantly across the threshold of structural variables. Using the recently developed Panel Latent Threshold Model, we identify latent groups of countries intrinsic to the structural characteristics of the variables. Results suggest that improvement in human development and financial infrastructure measures play a prominent role in enhancing the fiscal multiplier effects across the economies. We also find that economies can achieve higher fiscal multipliers by keeping a check on the import propensity. We identify female labour force participation as one of the significant structural determinants of the fiscal multiplier, where many latent groups find parallels with the declining portion of the feminisation U-shaped hypothesis. Overall, the results suggest that countries should pursue targeted structural change-oriented fiscal policy to achieve higher economic growth.

Suggested Citation

  • Gupta, Mahima & Dubey, Amlendu, 2025. "Structural characteristics and non-linear fiscal multipliers," Economic Systems, Elsevier, vol. 49(1).
    • Handle: RePEc:eee:ecosys:v:49:y:2025:i:1:s0939362524000694
    DOI: 10.1016/j.ecosys.2024.101247
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    More about this item

    Keywords

    Fiscal Multiplier; Structural Characteristics; Non-linear; Advanced Economies; Emerging Markets & Developing Economies; Latent Groups;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • C54 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Quantitative Policy Modeling

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