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On the Size of Fiscal Multipliers: A Counterfactual Analysis


  • Jan Kuckuck

    () (Universitaet Osnabrueck)

  • Frank Westermann

    () (Universitaet Osnabrueck)


The Structural Vector Auto-regression (SVAR) approach to estimating fiscal multipliers, following the seminal paper by Blanchard and Perotti (2002), has been widely applied in the literature. In our paper we discuss the interpretation of these estimates and suggest that they are more useful for forecasting purposes than for policy advice. Our key point is that policy instruments often react to each other. We analyze a data set from the US and document that these interactions are economically and statistically significant. Increases in spending have been financed by subsequent increases in taxes. Increases in taxes have been complemented by additional spending cuts in subsequent quarters. In a counterfactual analysis we report fiscal multipliers that abstract from these dynamic responses of policy instruments to each other.

Suggested Citation

  • Jan Kuckuck & Frank Westermann, 2013. "On the Size of Fiscal Multipliers: A Counterfactual Analysis," Working Papers 96, Institute of Empirical Economic Research, Osnabrueck University.
  • Handle: RePEc:iee:wpaper:wp0096

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    References listed on IDEAS

    1. repec:nbr:nberch:13342 is not listed on IDEAS
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    Cited by:

    1. Venturini, Fiorenza, 2016. "Are Estimates of Fiscal Multipliers Truly Reliable? Some Observations Starting from the Case of Japan," Centro Sraffa Working Papers CSWP23, Centro di Ricerche e Documentazione "Piero Sraffa".
    2. Jair N. Ojeda-Joya & Oscar E. Guzman, 2017. "The Size of Fiscal Multipliers and the Stance of Monetary Policy in Developing Economies," Working Papers 106, Institute of Empirical Economic Research, Osnabrueck University.

    More about this item


    Fiscal policy; government spending; net revenues; structural vector autoregression;

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General

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