SIZE AND IMPACT OF FISCAL MULTIPLIERS An Analysis of Selected South Asian Countries

Due to recent global financial and economic crisis a key issue in current research and for policy makers is the size of fiscal multipliers. Proper knowledge of fiscal multipliers is essential for the designing and implementation of fiscal policies. This research work intends to contribute in the literature on the size of fiscal multipliers for selected South Asian countries (Bangladesh, India, Pakistan and Sri Lanka) by using Panel Vector Autoregressive (PVAR) technique over the period 1982-2014. Results obtained from accumulated Impulse Response Functions (IRFs) show that government expenditures have overall positive impact on output in these countries. Among expenditures government investment multipliers are greater than government consumption multipliers on all time horizons. This finding suggests that governments should put more emphasis on public investment while allocating budget in these countries. When controlling for public debt, cumulative fiscal multipliers exhibit lower values. Additionally, the results also show that during business cycle phases government expenditures show more efficacies in recessions while lower effect in expansions.