Policy Research Working Paper
5220
Estimating the Fiscal Multiplier
in Argentina
Paloma Anós-Casero
Diego Cerdeiro
Riccardo Trezzi
The World Bank
Latin America and the Caribbean
Economic Policy Sector
February 2010
WPS5220
Produced by the Research Support Team
Abstract
The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development
issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the
names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those
of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and
its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent.
Policy Research Working Paper 5220
Argentina’s government has resorted to fiscal policy as a
countercyclical tool to mitigate the negative impact of
the current economic downturn on aggregate demand.
Empirical results based on a vector error correction model
suggest, however, that the fiscal multiplier is relatively
small and short-lived. This could reflect a number of
This paper—a product of the Economic Policy Sector, Latin America and the Caribbean—is part of a larger effort in the
department to estimate the fiscal multiplier in LAC countries. Policy Research Working Papers are also posted on the Web
at http://econ.worldbank.org. The author may be contacted at panoscasero@worldbank.org.
factors, including the higher propensity of households to
save during the economic downturn, the implementation
lag of public expenditures, particularly of capital
expenditures, and the narrow tax base that limits the
impact of countercyclical revenue measures on domestic
demand.
ESTIMATING THE FISCAL MULTIPLIER IN
ARGENTINA
Authors: Paloma Anós-Casero, Diego Cerde