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Cross-Region Transfers in a Monetary Union : Evidence from the US and Some Implications

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  • Pennings,Steven Michael

Abstract

US federal transfers to individuals are large, countercyclical, vary geographically, and are often credited for helping stabilize regional economies. This paper estimates the short-run effects of these transfers using plausibly exogenous regional variation in temporary stimulus packages and earlier permanent Social Security increases. States that received larger transfers tended to grow faster contemporaneously, with a multiplier of around 1.5 for permanent transfers and 1/3 for temporary transfers. Results are broadly consistent with an open-economy New Keynesian model. At business-cycle frequencies, cross-region transfer multipliers are not large, suggesting only modest gains in regional stabilization from US federal automatic stabilizers.

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  • Pennings,Steven Michael, 2020. "Cross-Region Transfers in a Monetary Union : Evidence from the US and Some Implications," Policy Research Working Paper Series 9244, The World Bank.
    • Handle: RePEc:wbk:wbrwps:9244
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    Cited by:

    1. Bracco,Jessica Roxana & Galeano,Luciana Maria & Juarros,Pedro Francisco & Riera-Crichton,Daniel & Vuletin,Guillermo Javier, 2021. "Social Transfer Multipliers in Developed and Emerging Countries : The Role of Hand-to-Mouth Consumers," Policy Research Working Paper Series 9627, The World Bank.
    2. Balazs Zelity, 2020. "Permanent Income Shocks and Inflation," Wesleyan Economics Working Papers 2020-003, Wesleyan University, Department of Economics.

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