Fiscal multipliers in a small open economy: the case of Austria

Čapek, Crespo Cuaresma, Holler, Schuster – Working Paper 5 – Oktober 2019

We estimates fiscal multipliers for Austria in a framework of model uncertainty emanating from the choice of a particular econometric model to obtain point estimates of the reaction of GDP to shocks in fiscal variables. We present a comprehensive framework which allows to assess the effects of different multiplier definitions and choices related to the data, the model employed, and further technical choices associated with the specification of the model exert on fiscal multiplier estimates. The mean present-value government spending multiplier over all models entertained, based on around 3000 estimates, is 0.68. Estimates of the peak spending multiplier for Austria tend to be larger than present-value spending multipliers, with a mean value of 0.85. The magnitude of the present-value tax multiplier is relatively high, with an average value across specifications of -1.12 and the mean peak tax multiplier is -0.54 for all specifications used. In absolute value, multiplier estimates tend to be larger if they are estimated using the subset of models with the best out-of-sample predictive ability.

Publikationsjahr: 2019
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