Clearing Up the Fiscal Multiplier Morass

By Eric M. Leeper, Nora Traum, Todd B. Walker. 2011

376 citations recorded by the source corpus.

Bayesian prior predictive analysis of five nested DSGE models suggests that model specifications and prior distributions tightly circumscribe the range of possible government spending multipliers. Multipliers are decomposed into wealth and substitution effects, yielding uniform comparisons across models. By constraining the multiplier to tight ranges, model and prior selections bias results, revealing less about fiscal effects in data than about the lenses through which researchers choose to interpret data. When monetary policy actively targets inflation, output multipliers can exceed one, but investment multipliers are likely to be negative. Passive monetary policy produces consistently strong multipliers for output, consumption, and investment.

Subfields: Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/a86b8f804dfa232660fc83451f73c24601047794

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In Economics and Econometrics

Citations in the corpus

REPORTING GUIDELINES FOR META‐ANALYSIS IN ECONOMICS (2020, methodology): “Research studies published in the most eminent economics journals and structural models employed by central banks now routinely rely on previously published meta-analyses to summarize the existing evidence in the field and to provide information for the calibration of key economic parameters (e.g., ”
Ten Years After the Financial Crisis: What Have We Learned from the Renaissance in Fiscal Research? (2019, positive): “Overall, these estimates are quite similar to those from the SVAR, natural experiment, and narrative literature, though the Leeper et al. multiplier are notable in that the upper part of the range is above one. On balance, the estimated multipliers are not very different across the two leading metho”