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Sophia Chen, Mr. Lev Ratnovski, and Pi-Han Tsai

output sums up to aggregate output, the effects on all sectors also sum up to the aggregate multiplier. For this reason, we refer to β G and β CR as sectoral contributions to the aggregate multipliers (“sectoral multipliers”). The results for sectoral multipliers are shown in Table 6 . Panel A reports the results for the entire sample. Panel B reports the results for the 2010-2015 period. We report the results for construction (columns 1-2), manufacturing (columns 3-4), and services excluding financials (columns 5-6). As before, we report the OLS estimates first

Mr. Raphael A Espinoza
In this paper, we estimate the aggregate and sectoral fiscal multipliers of EU Structural Investment (ESI) Funds and of public investment at the EU level. We complement these results with a specific application to the case of Slovenia. We first analyze aggregate data and find large and significant multipliers and strong crowding-in of private investment. Our main findings show that positive shocks to ESI Funds are followed by an increase in output that ranges from 1.2 percent on impact, to 1.8 percent after 1 year, and by an increase in private investment between 0.7 and 0.8 percent of GDP. We address country heterogeneity by dividing countries according to key characteristics that have been known to affect multipliers. In particular, we find higher multipliers in a group of CEE countries that are important recipients of European funds and are characterized by fixed exchange rate regimes and sound public investment governance (e.g. Croatia and Slovenia). We also complement the aggregate analysis by estimating the effect of different types of public investment and the effect of public investment on different sectors of the economy.
Mr. Raphael A Espinoza

estimating the effect of different types of public investment and the effect of public investment on different sectors of the economy. JEL Classification Numbers: E62; H30 Keywords: fiscal multiplier; European Structural Investment funds; private investment; Slovenia Author’s E-Mail Address: ldurand@imf.org ; respinoza@imf.org Contents Abstract I. Introduction II. Literature Review III. Fiscal Multipliers: An IV approach IV. Aggregate Multipliers V. Sectoral Multipliers A. Crowding-in of Investment B. Effect on Gross Value Added (Sectoral

Mr. Raphael A Espinoza

discuss in Appendix B.2. 13 IV. Aggregate Multipliers In this section we present the results for the aggregate multipliers associated with ESI Funds disbursements on GDP, total investment, private investment and employment. Table 4 reports the contemporaneous (Panel 1) and 1-year (Panel 2) multipliers estimated by 2 Stages Least Squares (2SLS), using the ESI funds predicted disbursements series as an instrument for actual ESI funds disbursements. The OLS estimates that use actual ESI funds disbursements as an explanatory variable are also presented to allow

Sophia Chen, Mr. Lev Ratnovski, and Pi-Han Tsai
We jointly estimate credit and fiscal multipliers in China. We use the tenure of the provincial party secretary, interacted with the type of stimulus used in other provinces, to obtain separate instruments for provincial credit and government expenditure. We estimate a fiscal multiplier of 0.8 and a credit multiplier of 0.2 in 2001-2015. The multipliers have changed over time. The fiscal multiplier has increased from 0.75 in 2001-2008 to 1.4 in 2010-2015. The credit multiplier has declined from 0.17 to zero over the same periods. Our results suggest that reducing credit growth in China is unlikely to disrupt output growth, whereas fiscal policy may be effective in supporting macroeconomic adjustment.
S. M. Ali Abbas

.8 percent of GDP with regular multiplier and 5.3 percent of GDP with state-dependent multiplier). Another tradeoff centers on the multiplier effect and credibility. Although fiscal consolidation comes at the cost of initially lower economic activity, it can help reduce sovereign risk premiums. In general, the balance will depend on the urgency of restoring market credibility, as well as on factors such as the size of the output gap, openness, and the simultaneity of the fiscal effort elsewhere (aggregate multipliers are larger for synchronized consolidations because

Mrs. Sandra V Lizarazo Ruiz, Adrian Peralta, and Mr. Damien Puy
This paper assesses the macroeconomic and distributional impact of personal income tax (PIT) reforms in the U.S. drawing on a multi-sector heterogenous agents model in which consumers have non-homothetic preferences and sectors differ in terms of their relative labor and skill intensity. The model is calibrated to key characteristics of the US economy. We find that (i) PIT cuts stimulate growth but the supply side effects are never large enough to offset the revenue loss from lower marginal tax rates; (ii) PIT cuts do “trickle-down” the income distribution: tax cuts stimulate demand for non-tradable services which raise the wages and employment prospects of low-skilled workers even if the tax cut is not directly incident on them; (iii) A revenue neutral tax plan that reduces PIT for middle-income groups, raises the consumption tax, and expands the Earned Income Tax Credit can have modestly positive effects on growth while reducing income polarization; (iv) The growth effects from lower income taxes are concentrated in non-tradable service sectors although the increased demand for tradable goods generate positive spillovers to other countries; (v) Tax cuts targeted to higher income groups have a stronger growth impact than tax cuts for middle income households but significantly worsen income polarization, even after taking into account trickle-down effects and an expansion of the Earned Income Tax Credit.
Mrs. Sandra V Lizarazo Ruiz, Adrian Peralta, and Mr. Damien Puy

response of top income groups to changes in marginal tax rates (see Saez et al. (2012) for a review, and Mertens (2015) ). There is also an extensive literature using micro-data models to capture the distributional effects based on a broad sample of household characteristics. Heterogenous agent models offer a natural way to address these questions simultaneously—to assess jointly the size of the aggregate multipliers and to trace out the general equilibrium distributional effects of changes to personal income taxes (See Guner et al. (2016) , and references therein

S. M. Ali Abbas, Mr. Bernardin Akitoby, Mr. Jochen R. Andritzky, Mr. Helge Berger, Mr. Takuji Komatsuzaki, and Justin Tyson

counterfactual in which there is gradual or no adjustment. In general, the balance will depend on the urgency of restoring market credibility, as well as on factors such as the size of the output gap, openness, and the simultaneity of the fiscal effort elsewhere (as aggregate multipliers are larger for synchronized consolidations, because of the weaker offset from external demand). In some cases, excessive front-loading, by undermining social and political cohesion, might hurt rather than help market confidence. Both the multiplier effect and the credibility effect have

Ms. Anita Tuladhar and Markus Bruckner
How effective was public investment in stimulating the Japanese economy during the economic stagnation of the 1990s? Using a dataset of regional public investment spending, we find that investment multipliers were higher than for public consumption, although they were relatively low and declining over time. The paper also finds that the effectiveness of economic infrastructure investment, implemented mainly by the central government, is lower than that of social investment mostly undertaken by local governments. These results suggest that while public investment may yield higher output effects than other spending, its effectiveness depends upon its composition, the level of government implementation, and supply side factors.