Advanced Search
MyIDEAS: Login

Fiscal Multipliers in Recession and Expansion

In: Fiscal Policy after the Financial Crisis

Contents:

Author Info

  • Alan J. Auerbach
  • Yuriy Gorodnichenko

Abstract

In this paper, we estimate government purchase multipliers for a large number of OECD countries, allowing these multipliers to vary smoothly according to the state of the economy and using real-time forecast data to purge policy innovations of their predictable components. We adapt our previous methodology (Auerbach and Gorodnichenko, 2011) to use direct projections rather than the SVAR approach to estimate multipliers, to economize on degrees of freedom and to relax the assumptions on impulse response functions imposed by the SVAR method. Our findings confirm those of our earlier paper. In particular, GDP multipliers of government purchases are larger in recession, and controlling for real-time predictions of government purchases tends to increase the estimated multipliers of government purchases in recession. We also consider the responses of other key macroeconomic variables and find that these responses generally vary over the cycle as well, in a pattern consistent with the varying impact on GDP.

(This abstract was borrowed from another version of this item.)

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.nber.org/chapters/c12634.pdf
Download Restriction: no

Bibliographic Info

as in new window

This chapter was published in:

  • Alberto Alesina & Francesco Giavazzi, 2013. "Fiscal Policy after the Financial Crisis," NBER Books, National Bureau of Economic Research, Inc, number ales11-1.
    This item is provided by National Bureau of Economic Research, Inc in its series NBER Chapters with number 12634.

    Handle: RePEc:nbr:nberch:12634

    Contact details of provider:
    Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
    Phone: 617-868-3900
    Email:
    Web page: http://www.nber.org
    More information through EDIRC

    Related research

    Keywords:

    Other versions of this item:

    Find related papers by JEL classification:

    References

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
    as in new window
    1. Yuriy Gorodnichenko & Enrique G. Mendoza & Linda L. Tesar, 2009. "The Finnish Great Depression: From Russia with Love," NBER Working Papers 14874, National Bureau of Economic Research, Inc.
    2. Oscar Jorda, 2007. "Inference for Impulse Responses," Working Papers 77, University of California, Davis, Department of Economics.
    3. Ethan Ilzetzki & Enrique G. Mendoza & Carlos A. Végh Gramont, 2011. "How Big (Small?) Are Fiscal Multipliers?," IMF Working Papers 11/52, International Monetary Fund.
    4. Lukas Vogel, 2007. "How do the OECD Growth Projections for the G7 Economies Perform?: A Post-Mortem," OECD Economics Department Working Papers 573, OECD Publishing.
    5. Alan J. Auerbach & William G. Gale, 2009. "Activist Fiscal Policy to Stabilize Economic Activity," NBER Working Papers 15407, National Bureau of Economic Research, Inc.
    6. Eric Sims & Ruediger Bachmann, 2011. "Confidence and the Transmission of Government Spending Shocks," 2011 Meeting Papers 83, Society for Economic Dynamics.
    7. Robert J. Gordon & Robert Krenn, 2010. "The End of the Great Depression 1939-41: Policy Contributions and Fiscal Multipliers," NBER Working Papers 16380, National Bureau of Economic Research, Inc.
    8. Alan J. Auerbach & Yuriy Gorodnichenko, 2010. "Measuring the Output Responses to Fiscal Policy," NBER Working Papers 16311, National Bureau of Economic Research, Inc.
    9. Daniel J. Wilson, 2010. "Fiscal spending multipliers: evidence from the 2009 American Recovery and Reinvestment Act," Working Paper Series 2010-17, Federal Reserve Bank of San Francisco.
    10. Òscar Jordà, 2005. "Estimation and Inference of Impulse Responses by Local Projections," American Economic Review, American Economic Association, vol. 95(1), pages 161-182, March.
    11. John C. Driscoll & Aart C. Kraay, 1998. "Consistent Covariance Matrix Estimation With Spatially Dependent Panel Data," The Review of Economics and Statistics, MIT Press, vol. 80(4), pages 549-560, November.
    Full references (including those not matched with items on IDEAS)

    Citations

    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. A review of the recent literature on fiscal multipliers: size matters!
      by laurence-df in OFCE le blog on 2012-11-21 07:03:54
    2. Une revue récente de la littérature sur les multiplicateurs budgétaires : la taille compte !
      by laurence-df in OFCE le blog on 2012-11-21 07:02:59
    3. Guest Contribution: "Monetary Alchemy, Fiscal Science"
      by Menzie Chinn in Econbrowser on 2013-01-26 09:00:31
    4. Monetary Alchemy, Fiscal Science
      by jfrankel in Jeff Frankels Weblog on 2013-01-26 17:16:19
    5. Multiplicadores Fiscales Durante la Recesión
      by Alejandro Villagomez in Tintero Económico Diario on 2012-05-13 21:21:00
    6. Monetary or fiscal stimulus can help only if unemployment is cyclical; otherwise, if unemployment is structural expansionary policies will lead only to inflation. Careful recent analyses indicate that unemployment is mainly cyclical in the US
      by Blog Admin in British Politics and Policy at LSE on 2012-10-24 16:00:33
    7. Given the enormity of the short- and long-run fiscal challenges facing the US, the lack of policy detail from both presidential candidates is disappointing
      by Blog Admin in British Politics and Policy at LSE on 2012-10-25 13:00:36
    8. Guest Contribution: "Monetary Alchemy, Fiscal Science"
      by Menzie Chinn in Econbrowser on 2013-01-26 09:00:31
    9. Monetary Alchemy, Fiscal Science
      by jfrankel in Jeff Frankels Weblog on 2013-01-26 17:16:19
    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as in new window

    Cited by:
    This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page.

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:nbr:nberch:12634. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.