Fiscal multipliers in downturns and the effects of Eurozone consolidation

CEPR Policy Insight No 79

Sebastian Gechert, Andrew Hughes Hallett, Ansgar Rannenberg

The literature on fiscal multipliers has expanded greatly since the outbreak of the Global Crisis. CEPR Policy Insight 79 reports on a meta-regression analysis of ?scal multipliers collected from a broad set of empirical reduced form models. Multiplier estimates are signi?cantly higher during economic downturns. Spending multipliers exceed tax multipliers, especially during recessions. The authors estimate that the Eurozone’s fiscal consolidation – most significantly transfer cuts – reduced GDP by 4.3% relative to the no-consolidation baseline in 2011, increasing to 7.7% in 2013.