Year: 2019 January, Volume 28 No. 2
Recognizing the importance of expanding fiscal spending programs and improving disbursement rates, the Aquino administration implemented the Disbursement Acceleration Program (DAP) in 2011. Acting as a fiscal stimulus but packing a fiscal surprise, the program has reportedly succeeded in improving fiscal expenditure performance until the Supreme Court stopped it based on constitutional grounds. While there were official claims that it was effective in spurring growth, no study has been offered to investigate plausible mechanisms leading to expansions in output. This study proposes the use ofa dynamic stochastic general equilibrium (DSGE)model to stochastically simulate and compute simple fiscal multipliers to understand and identify plausible model structures within the DAP. The principal aim is to be able to interpret some of the key features of the said initiative in strictly positive terms. We provide simulation-based evidence to track the impact of changes in model structure on fiscal multiplier estimates. We find that relatively higher multipliers are associated with persistent shock processes and the pre-announcement effects do enhance fiscal multipliers but not authorized budget multipliers, implying that government announcements may be essential in influencing the dynamics of government consumption but not government investment. Finally, the study confirms that shorter implementation delays lead to relatively higher fiscal multipliers.