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The Size and Evolution of the Government Spending Multiplier in France

Author

Listed:
  • Guillaume Cléaud
  • Matthieu Lemoine
  • Pierre-Alain Pionnier

Abstract

Focusing on government spending on private goods and services from 1980 to 2010, we nd that the scal multiplier in France is signi cant and close to 1 on impact, and becomes statistically insigni cant after about 3 years. Moreover, using a time-varying SVAR model, we conclude (1) that this multiplier does not evolve signifi cantly over any time horizon from the beginning of the 1980s onwards and (2) that the variance of shocks hitting the economy evolves more than the model autoregressive parameters. Even in alternative speci cations where Bayesian priors are pushed towards time variation, the main evolution that we uncover is a (nonsignifi cant) decrease in the medium-term spending multiplier, partly linked to the implementation of a more aggressive monetary policy since the 1990s. We fi nd no evidence of an increase in the multiplier during recessions in France. At the very least, business cycle conditions do not seem to be the main driver of the evolution of the government spending multiplier from 1980 to 2010.

Suggested Citation

  • Guillaume Cléaud & Matthieu Lemoine & Pierre-Alain Pionnier, 2017. "The Size and Evolution of the Government Spending Multiplier in France," Annals of Economics and Statistics, GENES, issue 127, pages 95-122.
  • Handle: RePEc:adr:anecst:y:2017:i:127:p:95-122
    DOI: 10.15609/annaeconstat2009.127.0095
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    File URL: http://www.jstor.org/stable/10.15609/annaeconstat2009.127.0095
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    More about this item

    Keywords

    Government Spending Multiplier; Evolution; TV-SVAR;

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • C54 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Quantitative Policy Modeling

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