Affiliation:
1. Department of Economics, 530 Evans Hall, University of California, Berkeley, CA 94720-3880 and National Bureau of Economic Research.
Abstract
A key issue in current research and policy is the size of fiscal multipliers when the economy is in recession. We provide three insights. First, using regime-switching models, we find large differences in the size of spending multipliers in recessions and expansions with fiscal policy being considerably more effective in recessions than in expansions. Second, we estimate multipliers for more disaggregate spending variables which behave differently relative to aggregate fiscal policy shocks, with military spending having the largest multiplier. Third, we show that controlling for predictable components of fiscal shocks tends to increase the size of the multipliers in recessions. (JEL C32, E62, H20, H62, H63)
Publisher
American Economic Association
Subject
General Economics, Econometrics and Finance
Cited by
926 articles.
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