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What determines government spending multipliers?
[Mafia and public spending: Evidence of the fiscal multiplier from a quasi-experiment’, mimeo]

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Listed:
  • Giancarlo Corsetti
  • André Meier
  • Gernot J. Müller

Abstract

This paper studies how the effects of government spending vary with the economic environment. Using a panel of OECD countries, we identify fiscal shocks as residuals from an estimated spending rule and trace their macroeconomic impact under different conditions regarding the exchange rate regime, public indebtedness, and health of the financial system. The unconditional responses to a positive spending shock broadly confirm earlier findings. However, conditional responses differ systematically across exchange rate regimes, as real appreciation and external deficits occur mainly under currency pegs. We also find output and consumption multipliers to be unusually high during times of financial crisis.— Giancarlo Corsetti, André Meier and Gernot J. Müller

Suggested Citation

  • Giancarlo Corsetti & André Meier & Gernot J. Müller, 2012. "What determines government spending multipliers? [Mafia and public spending: Evidence of the fiscal multiplier from a quasi-experiment’, mimeo]," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 27(72), pages 521-565.
    • Handle: RePEc:oup:ecpoli:v:27:y:2012:i:72:p:521-565.
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    File URL: http://hdl.handle.net/10.1111/j.1468-0327.2012.00295.x
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    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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