Budget-constrained expenditure multipliers

Abstract

Abstract:We show that standard expenditure multipliers capture economy-wide effects of new government projects only when financing constraints are not binding. In actual policy making, however, new projects usually need financing. Under liquidity constraints, new projects are subject to two opposite effects: an income effect and a set of spending substitution effects. The former is the traditional, unrestricted, multiplier effect; the latter is the result of expenditure reallocation to upheld effective financing constraints. Unrestricted multipliers will therefore be, as a general rule, upward biased and policy designs based upon them should be reassessed in the light of the countervailing substitution effects.

Input-Output Models and Derived Indicators: A Critical Review

“…Especially, the care of transitive planning must be to put the productive circuit to a correct developmental track (Baumol and Wolff, 1994), so as gradually to become more realistic the potential sectoral impulses into the perpetual optimization procedure for the social welfare (Lopes and Neder, 2017;Müller-Hansen et al, 2017). The sectoral attractiveness for the private investments' funds (Kolokontes et al, 2018), the estimation for the operational levels for each one sector as concerns the limits of their sectoral productive capabilities (Miller and Blair, 1985, p. 104), the natural sources and the environmental regulations and externalities (Müller-Hansen et al, 2017), the educational policy, the infrastructures (Kelly, 2015;Kelly et al, 2016), the private and the public budgets' restrictions and the opportunity cost of "expenditures substitution's effects" from the reallocation of public expenditures among the sectors or from changes on the taxes-policies (Cardenete et al, 2017;Guerra and Sancho, 2012;Oosterhaven, 2017;Temurshoev and Oosterhaven, 2014), the social satisfactory and the happiness, are also parameters that deserve attention. The heuristic feedbacks, the inferences and the conscious choices among alternative options and actions are parts into this cognitive process of decisionmaking (Weber, 1978;Gigerenzer and Gaissmaier, 2011).…”

“…The exploitation of information from these models has permitted to the policy-makers to have today at their hands, a variety of indicators for their developmental patterns (Bekhet, 2011). The indices constitute the heart of all the versions of primary model (Guerra and Sancho, 2012;Dietzenbacher et al, 2013). However, the indicators are not all the same suitable for any kind of planning (short-run or long-run), presenting advantages and disadvantages (Sonis et al, 1995).…”

Decomposition Analysis for the Comparison and the Comprehension of Conventional Input-Output Impacts’ Indicators: An Empirical Paradigm

“…I-O multipliers are used from the policy-makers for the management of developmental programming and constitute a common tool for the investigation of economic perspectives (Chisari et al, 2019;Freytag and Fricke, 2017;Guang and Wen, 2020;Guerra and Sancho, 2012;Haslop et al, 2017;Humavindu and Stage, 2013;Ivanova, 2014;Kakderi and Tasapoulou, 2017;Kelly et al, 2016;Lopes and Neder, 2017;Mariolis and Soklis, 2020;Mastronardi et al, 2012;Meng et al, 2019;Muller-Hansen et al, 2017;Nguyen et al, 2018;Nguyen et al, 2019;Romero et al, 2019;Sancho, 2013;Thomassin, 2018). Dietzenbacher (2005) had underlined that all the I-O multipliers are not the same suitable for all the occasions, their interpretations are differentiated and their usefulness are depended on the problem that one addresses.…”

A multiplier evaluation of primary factors supply–shocks in a regional economy

“…The fact that new demand injections need to be financed somehow –either by raising taxes or by issuing debt– has put somehow into question the validity of the standard demand‐side multiplier calculations (Guerra & Sancho, ). Whatever positive effects new demand may deliver in the short‐run, they need to be carefully balanced against the negative effects that will ensue from the reduction of available resources in the present (via taxes) or in the future (via debt).…”