What Determines Government Spending Multipliers?

Social Science Research Network, 2012

473 citations recorded by the source corpus.

This paper studies how the effects of government spending vary with the economic environment. Using a panel of OECD countries, we identify fiscal shocks as residuals from an estimated spending rule and trace their macroeconomic impact under different conditions regarding the exchange rate regime, public indebtedness, and health of the financial system. The unconditional responses to a positive spending shock broadly confirm earlier findings. However, conditional responses differ systematically across exchange rate regimes, as real appreciation and external deficits occur mainly under currency pegs. We also find output and consumption multipliers to be unusually high during times of financial crisis.

Subfields: Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/9949d1e6237f24815264bd436654722b43822685

Citations in the corpus

• Chronicle of a war foretold : the macroeconomic effects of anticipated defense spending shocks (2014, unknown): “of defense spending from its steady state value follows a fiscal rule of the form: gt= ρggt−1+ρ y−1 g yt−1+ρ y gyt+ρ b g(bt−b) + εg,t−j+εg0,t (9) Corsetti et al. (2012) estimate fiscal rules of this form for different OECD countries.”
• Exchange Rate Regimes and Fiscal Multipliers (2013, unknown): “However, in the presence of sovereign risk the multiplier is likely to be smaller relative to normal times if monetary policy is constrained (see Corsetti et al. 2012).”
• Fiscal Stimulus and Fiscal Sustainability (2017, unknown): “While this approach can limit our capacity to do counterfactual policy experiments, our findings could be used as inputs to discipline structural models as in Christiano et al. (2011), Coenen et al.”
• The Financial Cycle and Macroeconomics: What Have We Learnt? (2014, unknown): “For a review of the literature, see Corsetti et al (2012).”
• Government Spending Multipliers in Good Times and in Bad: Evidence from US Historical Data (2014, unknown): “See Corsetti et al. (2012) for a brief survey of this literature.”
• FISCAL POLICY AND ASSET PRICES (2013, unknown): “This highlights the dichotomy of the effects of fiscal policy on output in the closed versus the open economy and corroborates the findings of Corsetti et al. (2010), who argue that the effectiveness of fiscal stimulus decreases with the degree of openness.”
• Mafia and Public Spending: Evidence on the Fiscal Multiplier from a Quasi-experiment (2014, unknown): “…contraction is bound to be crucially affected by the monetary stance, as well as by the anticipation of fiscal measures (spending cuts or tax hikes) dictated by the need to stabilize public debt in the medium and long term (see e.g. Christiano et al. 2011; Corsetti et al. 2012b; and Woodford 2011).”