The Size of the Fiscal Expansion: An Analysis for the Largest Countries

The document analyzes the size of fiscal stimulus packages implemented by major countries in response to the 2008 financial crisis. It finds that the size of packages varied significantly, ranging from 4.8% of GDP for the US to 0.5% for India. This variation is explained by differences in the need for stimulus due to factors like automatic stabilizers and output gaps, as well as differences in available fiscal space constrained by public debt levels and financial sector support needs. While stimulus efforts will provide important support to growth, the outlook remains weak and downside risks remain, so some argue additional fiscal action may be needed if properly designed to not permanently increase deficits.