Sectoral Fiscal Multipliers and Budget Inflexibility: The Role of Allocative Inefficiency
Authors
Gomez-Gonzalez, Jose Eduardo
Valencia, Oscar
Herrera, David
Zapata, Steven
Editor
Publication date
2020-07-03
Document language
eng
Publisher
Metrics
downloads: 0
abstract_views: 0
Journal Title
Journal ISSN
Volume Title
Abstract
This paper studies fiscal multipliers in Colombia, an emerging economy with a high degree of inflexibility of expenditure at the sectoral level. The results show that the multiplier is almost twice as large in sectors in which the execution of flexible expenditure is favored over inflexible expenditure. This result is closely related to the fact that flexible expenditure is done in capital intensive sectors. Microsimulation estimations show that the reallocation of a 1% from inflexible to flexible spending has a positive effect of approximately 17% on the total fiscal multiplier. We provide empirical evidence of an inverted U-shaped fiscal multiplier on the reallocation effect across sectors.
Description
Códigos JEL
E62 - Fiscal Policy, O23 - Fiscal and Monetary Policy in Development
item.page.subjectjelspa
Keywords
Fiscal multipliers, Spending reallocation, Economías emergentes -- Colombia, Colombia
