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Estimating Fiscal Multipliers:News From a Nonlinear World

Author

Listed:
  • Giovanni Caggiano

    (University of Padova)

  • Efrem Castelnuovo

    (University of Melbourne, University of Padova)

  • Valentina Colombo

    (University of Padova)

  • Gabriela Nodari

    (University of Verona, University of New South Wales)

Abstract

We estimate nonlinear VARs to assess to what extent .scal spending multipliers are countercyclical in the United States. We deal with the issue of non-fundamentalness due to .scal foresight by appealing to sums of revisions of expectations of .scal expenditures. This measure of anticipated .scal shocks is shown to carry valuable information about future dynamics of public spending. Results based on generalized impulse responses suggest that .scal spending multipliers in recessions are greater than one, but not statistically larger than those in expansions. However, nonlinearities arise when focusing on "extreme" events, i.e., deep recessions vs. strong expansionary periods.

Suggested Citation

  • Giovanni Caggiano & Efrem Castelnuovo & Valentina Colombo & Gabriela Nodari, 2015. "Estimating Fiscal Multipliers:News From a Nonlinear World," Department of Economics - Working Papers Series 1196, The University of Melbourne.
    • Handle: RePEc:mlb:wpaper:1196
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    References listed on IDEAS

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    More about this item

    Keywords

    Fiscal news; Fiscal foresight; Fiscal spending multiplier; Smooth Transition Vector-AutoRegressions; Extreme events;
    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
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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