Fiscal Multiplier Heterogeneity Versus Monetary Transmission Asymmetry: A Cross-Regime Evaluation of Stabilization Policy Efficacy in Emerging Market Economies

Abstract

This study conducts a rigorous cross-regime evaluation of fiscal multiplier heterogeneity and monetary transmission asymmetry as competing stabilization frameworks across a panel of 34 emerging market economies over the period 2000–2023. Employing a panel smooth transition regression (PSTR) model augmented with local projections and sign-restricted structural vector autoregressions (SVARs), we disentangle the state-contingent effects of discretionary fiscal expenditure and policy rate adjustments on output gap closure and inflation variance. Our findings reveal that fiscal multipliers systematically exceed unity during episodes of binding zero-lower-bound constraints and elevated sovereign risk premia, whereas monetary transmission channels exhibit pronounced non-linearities conditional on exchange rate regime classification and capital account openness. The results carry significant implications for policy sequencing, optimal debt-to-GDP targeting, and the institutional design of macroprudential frameworks in economies undergoing financial deepening.