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

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

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Abstract

This paper compares the role of monetary and fiscal policy shocks in advanced and 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.

Item Type: Monograph (Working Paper)
Departments: Lancaster University Management School > Economics
ID Code: 137339
Deposited By: ep_importer_pure
Deposited On: 15 Oct 2019 15:15
Refereed?: No
Published?: Published
Last Modified: 23 Feb 2020 00:35
URI: https://eprints.lancs.ac.uk/id/eprint/137339

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