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The Stimulative Effects of Anticipated Government Spending Expansions : Evidence from Survey Forecasts

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  • NAM, Deokwoo
  • LI, Xiaole

Abstract

We employ a maximum forecast error variance VAR identification strategy to examine the effects of anticipated government spending expansions. In our post-1981 U.S. sample, an anticipated expansion in government spending is delayed and persistent. This expansion is associated with increases in consumption and investment, as well as in real wages and hours. It also has an accelerator effect on private capital investment and a delayed stimulative effect on private sector productivity. Moreover, the monetary and tax policies accompanying the anticipated government spending expansion align well with the Fedʼs dual mandate and with less progressive federal tax reforms, respectively.

Suggested Citation

  • NAM, Deokwoo & LI, Xiaole, 2024. "The Stimulative Effects of Anticipated Government Spending Expansions : Evidence from Survey Forecasts," Hitotsubashi Journal of Economics, Hitotsubashi University, vol. 65(1), pages 1-31, June.
    • Handle: RePEc:hit:hitjec:v:65:y:2024:i:1:p:1-31
    DOI: 10.15057/hje.2024001
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    References listed on IDEAS

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    More about this item

    Keywords

    anticipated government spending shocks; maximum forecast error variance approach; government spending multipliers; survey of professional forecasters;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General

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