Why are estimates of fiscal multipliers less reliable guides to the effectiveness of alternative fiscal responses to the recent global recession? How did the advice offered by IMF economists take into account uncertainty regarding most effective measures

Effectiveness of Alternative Fiscal Responses to the Recent Global Recession

Why are estimates of fiscal multipliers less reliable guides to the effectiveness of alternative fiscal responses to the recent global recession

There is no consensus among economist as to why estimates of fiscal multipliers are less reliable guides to the effectiveness of alternative fiscal responses to the recent global recession . At the onset , Baldwin (2009 ) asserts that there is yet no solution to stop the global economic crises . However , everyone agrees that fiscal stimulus plays a key role in reducing the

length and depth of the recession . Unfortunately , the lack of clarity on fiscal policy made it quite uneasy for economist to make accurate estimates (Baldwin . Baldwin noted that while other nation such as the United States , the U .K . and Japan have urgently responded by committing to fiscal stimulus , others such as Germany however do not see its This full-pledge recession which was seen to have been caused by a strong reduction in aggregate demand , due to a large decrease in financial wealth , an increase in precautionary saving on the part of households , increasing difficulties in obtaining credit , and wait-and-see attitude on the part of consumers and firms in the face of uncertainty (Regional Economic outlook ,

. 29 , has lead to a large debate among economist regarding the potential impact of the huge fiscal packages to address the issue of fiscal response to the recent global recession . Baksa , Benk , and Jakab (2009 ) implied that another reason why estimate...