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News on State-Dependent Fiscal Multipliers: The role of Confidence


  • Juan Manuel Figueres

    () (University of Padova)


This paper investigates the role of consumer confidence in determining the real effects that anticipated (news) government spending shocks have on output in recessions and in expansions as for the US economy. To account for fiscal foresight, I employ a measure of anticipated fiscal shocks defined as the sums of expectations’ revisions over future fiscal spending. This variable is shown to carry relevant information about movements on government spending. Results indicate that fiscal multipliers during recession are both statistically larger than in expansions and greater than one. Importantly, consumer confidence is shown to play a decisive role in determining the real effects of an anticipated spending shock within a non-linear framework. In particular, the response of confidence is key in explaining the statistically larger fiscal multipliers during recessions. Moreover, the role of confidence is found to be relevant for the transmission of anticipated shocks only. These results qualify confidence as a key ingredient for understanding the transmission of fiscal news shocks (as opposed to unanticipated fiscal shocks).

Suggested Citation

  • Juan Manuel Figueres, 2015. "News on State-Dependent Fiscal Multipliers: The role of Confidence," "Marco Fanno" Working Papers 0202, Dipartimento di Scienze Economiche "Marco Fanno".
  • Handle: RePEc:pad:wpaper:0202

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    Consumer Confidence; Fiscal forecast; Fiscal spending multiplier; Non-linear models; Smooth Transition Vector-AutoRegressions.;

    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
    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook

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