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Are Government Spending Multipliers Greater during Periods of Slack? Evidence from Twentieth-Century Historical Data

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  • Michael T. Owyang
  • Valerie A. Ramey
  • Sarah Zubairy

Abstract

A key question that has arisen during recent debates is whether government spending multipliers are larger during times when resources are idle. This paper seeks to shed light on this question by analyzing new quarterly historical data covering multiple large wars and depressions in the United States and Canada. Using Jorda's (2005) method for estimating impulse responses, we find no evidence that multipliers are greater during periods of high unemployment in the United States. In every case, they are below unity. We do find evidence of higher multipliers during periods of slack in Canada, with some multipliers above unity.

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Bibliographic Info

Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 103 (2013)
Issue (Month): 3 (May)
Pages: 129-34

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Handle: RePEc:aea:aecrev:v:103:y:2013:i:3:p:129-34

Note: DOI: 10.1257/aer.103.3.129
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Cited by:
  1. Òscar Jordà & Alan M. Taylor, 2013. "The time for austerity: estimating the average treatment effect of fiscal policy," Working Paper Series 2013-25, Federal Reserve Bank of San Francisco.
  2. Cléaud, G. & Lemoine, M. & Pionnier, P.-A., 2013. "Which size and evolution of the government expenditure multiplier in France (1980-2010)?," Working papers 469, Banque de France.
  3. Celbis, Mehmet Güney & Nijkamp, Peter & Poot, Jacques, 2013. "How big is the impact of infrastructure on trade? Evidence from meta-analysis," MERIT Working Papers 032, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).

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