Estimation of Fiscal Multipliers in a Small Open Economy: The Case of Barbados

Date: 11/13/2015
Author(s): Allan Wright, Shaiiede Kallicharan, Nlandu Mamingi and Tracey Maynard

Created 13 Nov, 2015
Categories Working Papers
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This paper explores the size and sign of exogenous fiscal shocks in Barbados using the structural vector autoregression (SVAR), Bayesian vector autoregression (BVAR) and dynamic stochastic general equilibrium (DSGE) models. Shocks to government spending are shown to have a positive impact on output across all models. Shocks to taxes are also shown to have a positive impact on output possibly hinting that a tax increase is usually followed by a spending increase which offsets the effects of the tax increase. Thus, we recommend that Government focus on increasing operational efficiency while correcting structural deficiencies and practicing prudent management of debt levels.

Estimation of Fiscal Multipliers in a Small Open Economy The Case of Barbados.pdf (957.76 KB)
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