IDEAS home Printed from https://ideas.repec.org/p/imf/imfwpa/2011-061.html
   My bibliography  Save this paper

How Strong are Fiscal Multipliers in the GCC?

Author

Listed:
  • Mr. Raphael A Espinoza
  • Mr. Abdelhak S Senhadji

Abstract

The effectiveness of fiscal policy in smoothing the impact of shocks depends critically on the size of fiscal multipliers. This is particularly relevant for the GCC countries given the need for fiscal policy to cushion the economy from large terms of trade shocks in the absence of an independent monetary policy and where fiscal multipliers could be weak dues to substantial leakages through remittances and imports. The paper provides estimates of the size of fiscal multipliers using a variety of models. The focus is on government spending since tax revenues are small. The long-run multiplier estimates vary in the 0.3-0.7 range for current expenditure and 0.6-1.1 for capital spending, depending on the particular specification and estimation method chosen. These estimates fall within the range of fiscal multiplier estimates in the literature for non-oil emerging markets.

Suggested Citation

  • Mr. Raphael A Espinoza & Mr. Abdelhak S Senhadji, 2011. "How Strong are Fiscal Multipliers in the GCC?," IMF Working Papers 2011/061, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2011/061
    as

    Download full text from publisher

    File URL: http://www.imf.org/external/pubs/cat/longres.aspx?sk=24715
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Nakibullah, Ashraf & Islam, Faridul, 2007. "Effect of government spending on non-oil GDP of Bahrain," Journal of Asian Economics, Elsevier, vol. 18(5), pages 760-774, October.
    2. Perotti, Roberto, 2005. "Estimating the Effects of Fiscal Policy in OECD Countries," CEPR Discussion Papers 4842, C.E.P.R. Discussion Papers.
    3. Ethan Ilzetzki & Carlos A. Vegh, 2008. "Procyclical Fiscal Policy in Developing Countries: Truth or Fiction?," NBER Working Papers 14191, National Bureau of Economic Research, Inc.
    4. Ilzetzki, Ethan & Mendoza, Enrique G. & Végh, Carlos A., 2013. "How big (small?) are fiscal multipliers?," Journal of Monetary Economics, Elsevier, vol. 60(2), pages 239-254.
    5. Olivier Blanchard & Roberto Perotti, 2002. "An Empirical Characterization of the Dynamic Effects of Changes in Government Spending and Taxes on Output," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 117(4), pages 1329-1368.
    6. International Monetary Fund, 2010. "The Cyclicality of Fiscal Policy in the Middle East and Central Asia: Is the Current Crisis Different?," IMF Working Papers 2010/068, International Monetary Fund.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Hamdi, Helmi & Sbia, Rashid, 2013. "Dynamic relationships between oil revenues, government spending and economic growth in an oil-dependent economy," Economic Modelling, Elsevier, vol. 35(C), pages 118-125.
    2. Raja AlMarzoqi & Sarra Ben Slimane & Saud Altamimi, 2023. "Nonlinear Fiscal Multipliers in Saudi Arabia," Economies, MDPI, vol. 11(1), pages 1-16, January.
    3. Serhan Cevik, 2019. "Policy coordination in fiscal federalism: drawing lessons from the Dubai debt crisis," International Journal of Emerging Markets, Emerald Group Publishing Limited, vol. 14(5), pages 899-915, April.
    4. Ashraf Nakibullah, 2016. "Impacts of Foreign and Domestic Structural Shocks on Consumer Prices of the GCC Countries," Research in World Economy, Research in World Economy, Sciedu Press, vol. 7(2), pages 34-43, December.
    5. Mr. Ananthakrishnan Prasad & Mr. Raphael A Espinoza, 2012. "Monetary Policy Transmission in the GCC Countries," IMF Working Papers 2012/132, International Monetary Fund.
    6. Jesús Botero García & Humberto Franco González & Álvaro Hurtado Rendón & Manuel Mesa, 2012. "Una aplicación de un modelo neoclásico DSGE con política fiscal," Documentos de Trabajo de Valor Público 10567, Universidad EAFIT.
    7. Konov, Joshua Ioji / JK, 2013. "Enhancing Markets (i.e. Economies) Transmissionability to Optimize Monetary Policies’ Effect," MPRA Paper 46950, University Library of Munich, Germany.
    8. Nicoletta Batini & Mr. Luc Eyraud & Miss Anke Weber, 2014. "A Simple Method to Compute Fiscal Multipliers," IMF Working Papers 2014/093, International Monetary Fund.
    9. Ashraf Nakibullah, 2018. "Economic Diversification in Bahrain," Applied Economics and Finance, Redfame publishing, vol. 5(5), pages 67-74, September.
    10. Ashraf Nakibullah, 2017. "State of Shocks Synchronization among Members of the GCC," Research in World Economy, Research in World Economy, Sciedu Press, vol. 8(1), pages 15-23, June.
    11. Alberto Behar & Armand Fouejieu, 2018. "External adjustment in oil exporters: The role of fiscal policy and the exchange rate," The World Economy, Wiley Blackwell, vol. 41(3), pages 926-957, March.
    12. Bibhuti Ranjan Mishra, 2019. "The Size of Fiscal Multipliers in India: A State Level Analysis Using Panel Vector Autoregression Model," Global Business Review, International Management Institute, vol. 20(6), pages 1393-1406, December.
    13. Yacoub Alatrash & Gani Nurmukhametov, 2021. "Fiscal Policy Effectiveness Under Different Debt Regimes: The Case of Egypt," Working Papers 1527, Economic Research Forum, revised 20 Dec 2021.
    14. André Diniz, 2018. "Effects of Fiscal Consolidations in Latin America," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 66(4), pages 694-731, December.
    15. García-Albán, Freddy & González-Astudillo, Manuel & Vera-Avellán, Cristhian, 2021. "Good policy or good luck? Analyzing the effects of fiscal policy and oil revenue shocks in Ecuador," Energy Economics, Elsevier, vol. 100(C).
    16. Al-Abri, Almukhtar & Genc, Ismail H. & Naufal, George S, 2018. "The Impact of Government Spending on GDP in a Remitting Country," IZA Discussion Papers 11676, Institute of Labor Economics (IZA).
    17. Mr. Saad A. Alshahrani & Mr. Ali J Al-Sadiq, 2014. "Economic Growth and Government Spending in Saudi Arabia: an Empirical Investigation," IMF Working Papers 2014/003, International Monetary Fund.
    18. Maria Elkhdari & Moez Souissi & Mr. Andrew Jewell, 2018. "Empirical Estimation of Fiscal Multipliers in MENA Oil-Exporting Countries with an Application to Algeria," IMF Working Papers 2018/124, International Monetary Fund.
    19. Vagliasindi,Maria & Gorgulu,Nisan, 2021. "What Have We Learned about the Effectiveness of Infrastructure Investment as a FiscalStimulus ? A Literature Review," Policy Research Working Paper Series 9796, The World Bank.
    20. Khatai Aliyev & Bruce Dehning & Orkhan Nadirov, 2016. "Modelling the Impact of Fiscal Policy on Non-Oil Gdp in a Resource Rich Country: Evidence from Azerbaijan," Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, Mendel University Press, vol. 64(6), pages 1869-1878.
    21. Mr. Marcello M. Estevão & Issouf Samaké, 2013. "The Economic Effects of Fiscal Consolidation with Debt Feedback," IMF Working Papers 2013/136, International Monetary Fund.
    22. International Monetary Fund, 2016. "Saudi Arabia: Selected Issues," IMF Staff Country Reports 2016/327, International Monetary Fund.
    23. Mr. Armand P Fouejieu & Mr. Sergio L. Rodriguez & Mr. Sohaib Shahid, 2018. "Fiscal Adjustment in the Gulf Countries: Less Costly than Previously Thought," IMF Working Papers 2018/133, International Monetary Fund.
    24. Mr. Yan Carriere-Swallow & Mr. Antonio David & Mr. Daniel Leigh, 2018. "The Macroeconomic Effects of Fiscal Consolidation in Emerging Economies: Evidence from Latin America," IMF Working Papers 2018/142, International Monetary Fund.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ashima Goyal & Bhavyaa Sharma, 2015. "Government expenditure in India: Composition, cyclicality and multipliers," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2015-032, Indira Gandhi Institute of Development Research, Mumbai, India.
    2. Sebastian Gechert & Ansgar Rannenberg, 2014. "Are Fiscal Multipliers Regime-Dependent? A Meta Regression Analysis," IMK Working Paper 139-2014, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    3. Oscar Parkyn & Tugrul Vehbi, 2014. "The Effects of Fiscal Policy in New Zealand: Evidence from a VAR Model with Debt Constraints," The Economic Record, The Economic Society of Australia, vol. 90(290), pages 345-364, September.
    4. Ashima Goyal & Bhavyaa Sharma, 2018. "Government Expenditure in India: Composition and Multipliers," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 16(1), pages 47-85, December.
    5. Paweł Baranowski & Piotr Krajewski & Michał Mackiewicz & Agata Szymańska, 2016. "The Effectiveness of Fiscal Policy Over the Business Cycle: A CEE Perspective," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 52(8), pages 1910-1921, August.
    6. Ricardo Félix & Gabriela Castro & José Maria & Paulo Júlio, 2013. "Fiscal Multipliers in a Small Euro Area Economy: How Big Can They Get in Crisis Times?," EcoMod2013 5307, EcoMod.
    7. Søren Ravn & Morten Spange, 2014. "The Effects of Fiscal Policy in a Small Open Economy with a Fixed Exchange Rate," Open Economies Review, Springer, vol. 25(3), pages 451-476, July.
    8. Hernán Rincón & Diego Rodríguez & Jorge Toro & Santiago Téllez, 2017. "FISCO: modelo fiscal para Colombia," Revista ESPE - Ensayos sobre Política Económica, Banco de la Republica de Colombia, vol. 35(83), pages 161-187, June.
    9. Sheremirov, Viacheslav & Spirovska, Sandra, 2022. "Fiscal multipliers in advanced and developing countries: Evidence from military spending," Journal of Public Economics, Elsevier, vol. 208(C).
    10. Sebastian Gechert, 2015. "What fiscal policy is most effective? A meta-regression analysis," Oxford Economic Papers, Oxford University Press, vol. 67(3), pages 553-580.
    11. Hollmayr, Josef & Kuckuck, Jan, 2018. "Fiscal multipliers of central, state and local government and of the social security funds in Germany: Evidence of a SVAR," Discussion Papers 28/2018, Deutsche Bundesbank.
    12. Al-Abri, Almukhtar & Genc, Ismail H. & Naufal, George S, 2018. "The Impact of Government Spending on GDP in a Remitting Country," IZA Discussion Papers 11676, Institute of Labor Economics (IZA).
    13. Kim, Hyeongwoo & Zhang, Shuwei, 2018. "Understanding Why Fiscal Stimulus Can Fail through the Lens of the Survey of Professional Forecasters," MPRA Paper 89326, University Library of Munich, Germany.
    14. Kim, Hyeongwoo & Shao, Peng & Zhang, Shuwei, 2023. "Policy coordination and the effectiveness of fiscal stimulus," Journal of Macroeconomics, Elsevier, vol. 75(C).
    15. Alemu Lambamo Hawitibo, 2023. "Explaining macroeconomic fluctuations in Ethiopia: the role of monetary and fiscal policies," Economic Change and Restructuring, Springer, vol. 56(2), pages 1033-1061, April.
    16. Contreras Juan & Battelle Holly, 2014. "Fiscal Multipliers in a Panel of Countries," Working Papers 2014-15, Banco de México.
    17. Giancarlo Corsetti & Michael P. Devereux & Luigi Guiso & John Hassler & Gilles Saint-Paul & Hans-Werner Sinn & Jan-Egbert Sturm & Xavier Vives, 2010. "Chapter 3: From Fiscal Rescue to Global Debt," EEAG Report on the European Economy, CESifo, vol. 0, pages 71-100, February.
    18. Jooste, Charl & Liu, Guangling (Dave) & Naraidoo, Ruthira, 2013. "Analysing the effects of fiscal policy shocks in the South African economy," Economic Modelling, Elsevier, vol. 32(C), pages 215-224.
    19. Jackson, Laura E. & Owyang, Michael T. & Zubairy, Sarah, 2018. "Debt and stabilization policy: Evidence from a Euro Area FAVAR," Journal of Economic Dynamics and Control, Elsevier, vol. 93(C), pages 67-91.
    20. Syed Kamran Abbas NAQVI* & Syed Faizan IFTIKHAR** & Asghar ALI**, 2019. "The Value of Fiscal Multiplier and Economic Characteristics of Countries," Pakistan Journal of Applied Economics, Applied Economics Research Centre, vol. 29(2), pages 291-311.

    More about this item

    Keywords

    WP; spending; GDP; estimate; country;
    All these keywords.

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:imf:imfwpa:2011/061. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Akshay Modi (email available below). General contact details of provider: https://edirc.repec.org/data/imfffus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.