Effectiveness of the Australian Fiscal Stimulus Package: A DSGE Analysis

27 Pages Posted: 21 Mar 2016

See all articles by Shuyun May Li

Shuyun May Li

University of Melbourne

Adam Spencer

The University of Nottingham

Date Written: March 2016

Abstract

We develop and estimate a small open economy dynamic stochastic general equilibrium model to investigate the effectiveness of the Australian fiscal stimulus package introduced in the aftermath of the global financial crisis (GFC). The estimated model implies a fiscal multiplier of 0.9 on impact and 1.26 with one‐year monetary accommodation. Utilising the estimated shocks – in particular, the fiscal shocks that mimic the stimulus transfers – we conduct several counterfactual policy experiments. Our results suggest that the stimulus transfers were almost equally important as the concurrent monetary easing actions in helping the Australian economy to avoid a recession after the GFC.

Suggested Citation

Li, Shuyun May and Spencer, Adam, Effectiveness of the Australian Fiscal Stimulus Package: A DSGE Analysis (March 2016). Economic Record, Vol. 92, Issue 296, pp. 94-120, 2016, Available at SSRN: https://ssrn.com/abstract=2752151 or http://dx.doi.org/10.1111/1475-4932.12224

Shuyun May Li (Contact Author)

University of Melbourne ( email )

Melbourne, 3010
Australia

Adam Spencer

The University of Nottingham ( email )

University Park
Nottingham, NG7 2RD
United Kingdom

HOME PAGE: http://adamhalspencer.com

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