Fiscal Multipliers in Bulgaria: Low But Still Relevant

February 25, 2013

Preview Citation

Format: Chicago

Dirk V Muir, and Anke Weber. Fiscal Multipliers in Bulgaria: Low But Still Relevant, (USA: International Monetary Fund, 2013) accessed November 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

With fiscal adjustment proceeding quickly in Bulgaria and given the weak economic growth environment, there is keen interest in making the budget composition more growth friendly. This paper quantifies the short-term impact of fiscal policy on economic activity in Bulgaria using econometric and model-based approaches. While fiscal multipliers have been modest in the past, as can be expected in a small open emerging economy, the effect on output is not independent of the speed of adjustment and the specific consolidation measures used. The impact of fiscal policy on economic activity is larger in downturns than in expansions and capital spending and direct taxes are associated with the largest effects on output, while non-targeted government transfers and indirect taxes are associated with a smaller impact. The results suggest that increased capital spending financed by higher indirect tax revenue collections through base broadening has sizeable growth effects over the medium and long-term.

Subject: Expenditure, Fiscal consolidation, Fiscal multipliers, Fiscal policy, Public investment spending

Keywords: Bulgaria, Business cycle, Economy, Fiscal consolidation, Fiscal multipliers, Fiscal policy, Fiscal policy question, GDP, General equilibrium models, Global, Government consumption expenditure, Government consumption multiplier, Nonlinear analysis, Open economy, Public investment spending, Revenue, Revenue multiplier, Spending, Spending multiplier, Stimulus measure, WP

Publication Details

Pages:

19
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2013/049
Stock No:

WPIEA2013049
ISBN:

9781475560473
ISSN:

1018-5941

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