Locally financed and outside financed regional fiscal multipliers

doi:10.1016/j.econlet.2022.110389

Publication:
Locally financed and outside financed regional fiscal multipliers

dc.contributor.author	Pennings, Steven
dc.date.accessioned	2022-04-08T08:07:27Z
dc.date.available	2022-04-08T08:07:27Z
dc.date.issued	2022-04
dc.description.abstract	The size of regional fiscal multipliers determines the efficacy of fiscal stimulus, the costs of fiscal austerity and whether countercyclical fiscal policy is more effective at the federal or local level. This paper studies fiscal multipliers in regions of a monetary union—US states, Eurozone members, or countries with a hard exchange-rate peg—and how multipliers are affected by the way spending is financed: local deficit financing, local tax financing or outside financing (federal or foreign aid). I present analytical and quantitative government purchase and transfer multipliers using a New Keynesian model consistent with estimated transfer multipliers in Pennings (2021), focusing on the persistence of the fiscal shock. I find that at business-cycle frequencies, financing has little effect on impact multipliers: outside-financed multipliers are only about 0.07–0.16 larger than local deficit-financed multipliers. This suggests efforts to enable local countercyclical fiscal policy may be a partial substitute for greater fiscal centralization or foreign financing.	en
dc.identifier.citation	Economics Letters
dc.identifier.doi	10.1596/37277
dc.identifier.issn	0165-1765
dc.identifier.uri	https://hdl.handle.net/10986/37277
dc.language.iso	en_US
dc.publisher	Elsevier
dc.rights	CC BY-NC-ND 3.0 IGO
dc.rights.holder	World Bank
dc.rights.uri	http://creativecommons.org/licenses/by-nc-nd/3.0/igo
dc.subject	FISCAL MULTIPLIER
dc.subject	NEW KEYNESIAN MODEL
dc.subject	MONETARY UNION
dc.subject	FISCAL FEDERALISM
dc.subject	LOCAL FINANCE
dc.title	Locally financed and outside financed regional fiscal multipliers	en
dc.type	Journal Article	en
dc.type	Article de journal	fr
dc.type	Artículo de revista	es
dspace.entity.type	Publication
okr.associatedcontent	https://www.sciencedirect.com/science/article/abs/pii/S0165176522000635?via%3Dihub#! Journal website (version of record)	en
okr.date.disclosure	2025-04-01
okr.date.doiregistration	2025-05-06T11:00:08.723058Z
okr.doctype	Journal Article
okr.externalcontent	External Content
okr.identifier.doi	10.1016/j.econlet.2022.110389
okr.journal.nbpages	110389
okr.language.supported	en
okr.peerreview	Academic Peer Review
okr.topic	Finance and Financial Sector Development::Access to Finance
okr.topic	Macroeconomics and Economic Growth::Fiscal & Monetary Policy
okr.topic	Macroeconomics and Economic Growth::Fiscal Adjustment
okr.topic	Finance and Financial Sector Development::Finance and Development
okr.topic	Macroeconomics and Economic Growth::Regional Economic Development
okr.unit	Development Research Group
okr.volume	213
relation.isAuthorOfPublication	83daf4e9-5061-5f1f-b16b-68116394433c
relation.isAuthorOfPublication.latestForDiscovery	83daf4e9-5061-5f1f-b16b-68116394433c