Medium-Term State-Dependent Fiscal Multipliers in BRICS - Empirical Evidence from a Panel Data Local Projection Model

This study estimates state-dependent fiscal multipliers for BRICS economies over 2000–2020 using Jorda’s (2005) local projection method, offering fresh evidence on fiscal policy effectiveness during recessions and expansions. Results show fiscal policy is more effective in expansion, with more substantial impacts linked to sound fiscal balance, prudent debt management, and investment- and tax-led policies over consumption- or expenditure-led approaches. The study shows that a positive shock to consumption during recessionary times tend to stimulate output growth by approximately 0.1 − 0.22%. The study reveals that strong fiscal balance tend to enhance output growth of the BRICS economy by around 0.1-1%. Furthermore the study observes that investment during recessionary times enhances outpugrowth by about 0.26%. Finally, the study finds that public debt effects on output growth are state-dependent across BRICS economies. These findings remain robust under alternative specifications. The study contributes to academic debate and policymaking by clarifying how fiscal multipliers vary across business cycles and by identifying macroeconomic and fiscal conditions that enhance medium-term growth in emerging economies.