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Tradable Spillovers of Fiscal Policy: Evidence from the 2009 Recovery Act

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  • McCrory, Peter B

Abstract

Local fiscal policy shocks propagate between labor markets through the trade in intermediate goods used in final production. Through this channel, each $1 of local aid from the 2009 Recovery Act increased output by $1.33 in the rest of the country over two years, in addition to its local state-level effect of $1.46. Combining both the local and spillover effects, absent other offsetting forces, the implied aggregate multiplier from the Recovery Act was approximately 2.8. A sectoral decomposition of the direct and spillover effects is consistent with the spillover effects being mediated through the trade in intermediate goods.

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  • McCrory, Peter B, 2020. "Tradable Spillovers of Fiscal Policy: Evidence from the 2009 Recovery Act," Institute for Research on Labor and Employment, Working Paper Series qt04n482qf, Institute of Industrial Relations, UC Berkeley.
    • Handle: RePEc:cdl:indrel:qt04n482qf
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    Cited by:

    1. Timothy G. Conley & Bill Dupor & Mahdi Ebsim & Jingchao Li & Peter B. McCrory, 2020. "A Local-Spillover Decomposition of the Causal Effect of U.S. Defense Spending Shocks," Working Papers 2020-014, Federal Reserve Bank of St. Louis.
    2. Auerbach, Alan & Gorodnichenko, Yuriy & McCrory, Peter B. & Murphy, Daniel, 2022. "Fiscal multipliers in the COVID19 recession," Journal of International Money and Finance, Elsevier, vol. 126(C).
    3. Ricardo Duque Gabriel & Mathias Klein & Ana Sofia Pessoa, 2023. "The Effects of Government Spending in the Eurozone," Journal of the European Economic Association, European Economic Association, vol. 21(4), pages 1397-1427.
    4. Timothy G. Conley & Bill Dupor & Rong Li & Yijiang Zhou, 2023. "Decomposing the Government Transfer Multiplier," Working Papers 2023-017, Federal Reserve Bank of St. Louis, revised 17 Nov 2023.
    5. Timothy G. Conley & Bill Dupor & Mahdi Ebsim & Jingchao Li & Peter B. McCrory, 2021. "The Local-Spillover Decomposition of an Aggregate Causal Effect," Working Papers 2021-006, Federal Reserve Bank of St. Louis.

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    Keywords

    Social and Behavioral Sciences; fiscal policy; spillover effects; labor markets; recession;
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