Journal of Political Economy· 2017Q1
Government Spending Multipliers in Good Times and in Bad: Evidence from US Historical Data
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- Q1SCImago
- 2017year
Short summary
US government spending multipliers are below unity regardless of economic slack, but may reach 1.5 near the zero lower bound.
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Key points
- Government spending multipliers are estimated to be below unity across various economic conditions, including periods of slack.
- The results are robust to different identification schemes, estimation methodologies, and alternative specifications.
- Multipliers near the zero lower bound show mixed results, with some specifications indicating values as high as 1.5.
AI-generated from the title and abstract; the full text is not read.
Abstract
We investigate whether US government spending multipliers are higher during periods of economic slack or when interest rates are near the zero lower bound. Using new quarterly historical US data covering multiple large wars and deep recessions, we estimate multipliers that are below unity irrespective of the amount of slack in the economy. These results are robust to two leading identification schemes, two different estimation methodologies, and many alternative specifications. In contrast, the results are more mixed for the zero lower bound state, with a few specifications implying multipliers as high as 1.5.
The authors' abstract, as published at the source. Journal of Political Economy, 2017 · DOI ↗
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Field: General Economics, Econometrics and Finance
General Economics, Econometrics and FinanceEconomics, Econometrics and Finance