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Fiscal Multipliers: A Meta Regression Analysis

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  • Sebastian Gechert
  • Henner Will

Abstract

Since the fiscal expansion during the Great Recession 2008-2009 and the current European consolidation and austerity measures, the analysis of fiscal multiplier effects is back on the scientific agenda. The number of empirical studies is growing fast, tackling the issue with manifold model classes, identification strategies, and specifications. While plurality of methods seems to be a good idea to address a complicated issue, the results are far off consensus. We apply meta regression analysis to a set of 89 studies on multiplier effects in order to provide a systematic overview of the different approaches, to derive stylized facts and to separate structural from method-specific effects. We classify studies with respect to type of fiscal impulse, model class, multiplier calculation method and further control variables. Moreover, we analyse subsamples of the model classes in order to evaluate the effects of model-class-specific properties, currently discussed in the literature, such as the influence of central bank reaction functions and liquidity constrained households. As a major result, we find that the reported size of the fiscal multiplier crucially depends on the setting and method chosen. Thus, economic policy consulting based on a certain multiplier study should lay open by how much specification affects the results. Our meta analysis may provide guidance concerning influential factors.

Suggested Citation

  • Sebastian Gechert & Henner Will, 2012. "Fiscal Multipliers: A Meta Regression Analysis," IMK Working Paper 97-2012, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
  • Handle: RePEc:imk:wpaper:97-2012
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    More about this item

    Keywords

    multiplier effects; fiscal policy; meta analysis;

    JEL classification:

    • E27 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation: Models and Applications
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General

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