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Estimating Fiscal Multipliers by Combining Statistical Identification with Potentially Endogenous Proxies

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  • Sascha A. Keweloh
  • Mathias Klein
  • Jan Pruser

Abstract

Different proxy variables used in fiscal policy SVARs lead to contradicting conclusions regarding the size of fiscal multipliers. Our analysis suggests that the conflicting results may stem from violations of the proxy exogeneity assumptions. We propose a novel approach to include proxy variables into a Bayesian non-Gaussian SVAR, tailored to accommodate potentially endogenous proxies. Using our model, we find that increasing government spending is more effective in stimulating the economy than reducing taxes.

Suggested Citation

  • Sascha A. Keweloh & Mathias Klein & Jan Pruser, 2023. "Estimating Fiscal Multipliers by Combining Statistical Identification with Potentially Endogenous Proxies," Papers 2302.13066, arXiv.org, revised Aug 2025.
    • Handle: RePEc:arx:papers:2302.13066
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    References listed on IDEAS

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