Fiscal Multipliers and Balance Sheet Effects in a Small Open Economy

DOI:  https://doi.org/10.12804/revistas.urosario.edu.co/economia/a.9178

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Published: Jun 18, 2020
Issue: Vol. 23 No. 2 (2020)
Section Articles


Keywords: Fiscal multipliers , fiscal policy rules , non-Ricardian households , DSGE model , financial frictions , nominal contracts multiplicadores fiscales , reglas de política fiscal , agentes no-ricardianos , modelos DSGE , fricciones financieras , contratos nominales multiplicadores fiscais , regras de política fiscal , lares não-Ricardianos , modelos DSGE , fricções financeiras , contratos nominais

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Authors

Martha López Piñeros Banco de la República de ColombiaC
Abstract

Fiscal multipliers are different across countries and according to economic circumstances. Investment multipliers have recently been subjects of analysis, especially for advanced economies. For small open economies, such as Colombia, there is not much research in this regard, and there are no descriptions of the transmission mechanisms. In this paper, we present empirical evidence of the investment and output fiscal multipliers. Afterward, we present a set of models with financial frictions that describe the transmission mechanisms that explain the investment multipliers under different characteristics of the economy. The main results show that balance sheet effects with nominal contracts replicate the empirical findings of increase investment. The degree of openness of the economy and the level of country risk premium are essential mechanisms.

How to Cite
López Piñeros, M. (2020). Fiscal Multipliers and Balance Sheet Effects in a Small Open Economy. Revista Economía Del Rosario, 23(2), 1–42. https://doi.org/10.12804/revistas.urosario.edu.co/economia/a.9178
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