Fiscal Multipliers vs. Monetary Transmission Mechanisms: A Comparative Decomposition of Macroeconomic Stabilization Efficacy Under Heterogeneous Debt Regimes

Abstract

This study conducts a rigorous comparative assessment of fiscal multiplier dynamics and monetary transmission channels as competing stabilization instruments across economies characterized by heterogeneous sovereign debt regimes. Employing a panel structural vector autoregression (PSVAR) framework augmented with time-varying parameters, we analyze quarterly macroeconomic data from 38 OECD and emerging market economies over the period 2000–2023. Our findings indicate that fiscal multipliers exhibit significant non-linearity contingent on debt-to-GDP thresholds, while monetary transmission efficacy is systematically attenuated in high-debt environments due to sovereign risk premia compression. Counterfactual simulations further demonstrate that coordinated policy sequencing outperforms independent instrument deployment by approximately 1.8 percentage points in output gap closure. These results carry substantive implications for post-pandemic fiscal consolidation strategies and central bank forward guidance frameworks.