Fiscal Multipliers in Recessions
AbstractThe Great Recession, and the fiscal response to it, has revived interest in the size of fiscal multipliers. Standard business cycle models have difficulties generating multipliers greater than one. And they also fail to produce any significant asymmetry in the size of the multipliers over the business cycle. In this paper we employ a variant of the Curdia-Woodford model of costly financial intermediation to show that fiscal multipliers are strongly countercyclical. In particular, they can take values exceeding two during recessions, declining to values below one during expansions.
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Date of creation: May 2012
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More information through EDIRC
Government Spending Multipliers; Cyclicality; Financial Frictions;
Find related papers by JEL classification:
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
- H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-05-08 (All new papers)
- NEP-DGE-2012-05-08 (Dynamic General Equilibrium)
- NEP-MAC-2012-05-08 (Macroeconomics)
- NEP-PBE-2012-05-08 (Public Economics)
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.:
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"Credit Frictions and Optimal Monetary Policy,"
0809-02, Columbia University, Department of Economics.
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16311, National Bureau of Economic Research, Inc.
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NBER Working Papers
15394, National Bureau of Economic Research, Inc.
- Rüdiger Bachmann & Eric R. Sims, 2011.
"Confidence and the Transmission of Government Spending Shocks,"
NBER Working Papers
17063, National Bureau of Economic Research, Inc.
- Bachmann, Rüdiger & Sims, Eric R., 2012. "Confidence and the transmission of government spending shocks," Journal of Monetary Economics, Elsevier, vol. 59(3), pages 235-249.
- Eric Sims & Ruediger Bachmann, 2011. "Confidence and the Transmission of Government Spending Shocks," 2011 Meeting Papers 83, Society for Economic Dynamics.
- Simon Gilchrist & Egon Zakrajsek, 2012.
"Credit Spreads and Business Cycle Fluctuations,"
American Economic Review,
American Economic Association, vol. 102(4), pages 1692-1720, June.
- Boucekkine, Raouf, 1995. "An alternative methodology for solving nonlinear forward-looking models," Journal of Economic Dynamics and Control, Elsevier, vol. 19(4), pages 711-734, May.
Blog mentionsAs found by EconAcademics.org, the blog aggregator for Economics research:
- Fiscal Multipliers in Recessions
by Christian Zimmermann in NEP-DGE blog on 2012-05-11 15:39:15
- Multiplicadores Fiscales Durante la RecesiÃ³n
by Alejandro Villagomez in Tintero Económico Diario on 2012-05-13 21:21:00
- Steven Fazzari & James Morley & Irina Panovska, 2013.
"State-Dependent Effects of Fiscal Policy,"
2012-27A, School of Economics, The University of New South Wales.
- Steven Fazzari & James Morley & Irina Panovska, 2013. "State-Dependent Effects of Fiscal Policy," Discussion Papers 2012-27B, School of Economics, The University of New South Wales.
- Steven M. Fazzari & James Morley & Irina Panovska, 2012. "State-Dependent Effects of Fiscal Policy," INET Research Notes 3, Institute for New Economic Thinking (INET).
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