Other publications may include books, quarterly reviews, annual reports and economic bulletins from the ECB, PhD theses and Danmarks Nationalbank’s policies.

Macroeconomic Effects of Fiscal Policy - Part 2

This article provides an overview of recent empirical literature on the economic effects of fiscal policy changes. A key finding of this literature is that the effect of fiscal policy is not constant, but varies over time and place, depending on a number of economic conditions. The article also presents a new, empirical study of the effects of fiscal policy in Denmark. The study shows that fiscal stimulus may have a significant impact on real gross domestic product, GDP, in the short term. However, the expansionary effect quickly dies out as the fiscal stimulus is removed. This would indicate that the dynamic effects of fiscal policy are relatively moderate in Denmark. Finally, the analysis demonstrates that the effects of fiscal policy have increased in Denmark during recent decades relative to the 1970s and the 1980s, presumably because Denmark now pursues a credible fixed exchange rate policy with focus on the sustainability of public finances.