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Global growth on life support?: The contributions of fiscal and monetary policy since the global financial crisis

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Global growth on life support? The contributions of fiscal and monetary policy since the global financial crisis. / Baumann, Ursel; Lodge, David; Miescu, Mirela.
Frankfurt am Main: European Central Bank, 2019.

Research output: Working paper

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Baumann U, Lodge D, Miescu M. Global growth on life support? The contributions of fiscal and monetary policy since the global financial crisis. Frankfurt am Main: European Central Bank. 2019 Oct 2. doi: 10.2866/877559

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@techreport{29d0cee6699042038e19a9d712513ffe,
title = "Global growth on life support?: The contributions of fiscal and monetary policy since the global financial crisis",
abstract = "This paper compares the role of monetary and fiscal policy shocks in advancedand emerging economies. Using a model with a hierarchical structure we capture the variability of GDP response to policy shocks both between and within the groups of advanced and emerging countries. Our results provide evidence that fiscal policy effects are heterogeneous across countries, with higher multipliers in advanced economies compared to emerging markets, while monetary policy is found to have more homogeneous effects on GDP. We then quantify the policy contribution on GDP growth in the last decade by means of a structural counterfactual analysis based on conditional forecasts. We find that global GDP growth benefited from substantial policy support during the global financial crisis but policy tightening thereafter, particularly fiscal consolidation, acted as a significant drag on the subsequent global recovery. In addition we show that the role of policy has differed across countries. Specifically, in advanced economies, highly accommodative monetary policy has been counteracted by strong fiscal consolidation. By contrast, in emerging economies, monetary policy has been less accommodative since the global recession.",
author = "Ursel Baumann and David Lodge and Mirela Miescu",
year = "2019",
month = oct,
day = "2",
doi = "10.2866/877559",
language = "English",
publisher = "European Central Bank",
type = "WorkingPaper",
institution = "European Central Bank",

}

RIS

TY - UNPB

T1 - Global growth on life support?

T2 - The contributions of fiscal and monetary policy since the global financial crisis

AU - Baumann, Ursel

AU - Lodge, David

AU - Miescu, Mirela

PY - 2019/10/2

Y1 - 2019/10/2

N2 - This paper compares the role of monetary and fiscal policy shocks in advancedand emerging economies. Using a model with a hierarchical structure we capture the variability of GDP response to policy shocks both between and within the groups of advanced and emerging countries. Our results provide evidence that fiscal policy effects are heterogeneous across countries, with higher multipliers in advanced economies compared to emerging markets, while monetary policy is found to have more homogeneous effects on GDP. We then quantify the policy contribution on GDP growth in the last decade by means of a structural counterfactual analysis based on conditional forecasts. We find that global GDP growth benefited from substantial policy support during the global financial crisis but policy tightening thereafter, particularly fiscal consolidation, acted as a significant drag on the subsequent global recovery. In addition we show that the role of policy has differed across countries. Specifically, in advanced economies, highly accommodative monetary policy has been counteracted by strong fiscal consolidation. By contrast, in emerging economies, monetary policy has been less accommodative since the global recession.

AB - This paper compares the role of monetary and fiscal policy shocks in advancedand emerging economies. Using a model with a hierarchical structure we capture the variability of GDP response to policy shocks both between and within the groups of advanced and emerging countries. Our results provide evidence that fiscal policy effects are heterogeneous across countries, with higher multipliers in advanced economies compared to emerging markets, while monetary policy is found to have more homogeneous effects on GDP. We then quantify the policy contribution on GDP growth in the last decade by means of a structural counterfactual analysis based on conditional forecasts. We find that global GDP growth benefited from substantial policy support during the global financial crisis but policy tightening thereafter, particularly fiscal consolidation, acted as a significant drag on the subsequent global recovery. In addition we show that the role of policy has differed across countries. Specifically, in advanced economies, highly accommodative monetary policy has been counteracted by strong fiscal consolidation. By contrast, in emerging economies, monetary policy has been less accommodative since the global recession.

U2 - 10.2866/877559

DO - 10.2866/877559

M3 - Working paper

BT - Global growth on life support?

PB - European Central Bank

CY - Frankfurt am Main

ER -