Glopolis is a non-partisan, non-governmental organization which focuses on the analysis of economic globalization, trade, development, agriculture and climate change.

The Great Multiplier Debate: Options for Fiscal Stimulus in the Czech Republic

Glopolis issued a policy brief dealing with options for fiscal stimulus in the Czech Republic.

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The Great Multiplier Debate: Options for Fiscal Stimulus in the Czech Republic

The global debate between proponents of expansionist and austerity policies takes place on all levels, from the G20 to the EU and national capitals. In the immediate aftermath of the financial crisis, most countries opted for expansionist policies, while in 2010, most turned to austerity. At the end of 2012, the debate seems to be approaching another turning point, not least due to the reconsideration of the estimated value of fiscal multipliers. The IMF recently concluded that multipliers are much higher in crisis circumstances than previously assumed. This dramatically increases the costs of austerity in terms of GDP loss, while at the same time making fiscal expansion a much more attractive response to ongoing recession, at least for those countries that can borrow cheaply. 

This policy brief provides a clear summary of the debate between „Expansionists“ and „Austerians“ that largely hinges on the value of fiscal multipliers. It reviews some of the recent estimates of multipliers for various economies and their implications for policy in the Czech Republic. It concludes that targeted stimulus for the construction sector, such as subsidies for thermal insulation of buildings, provides a feasible pro-growth policy option.

Here you may download the The Great Multiplier Debate: Options for Fiscal Stimulus in the Czech Republic (PDF, 575 KB) (draft version)

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